On Tuesday, which signified the start of the 5th (Brazil, Russia, India, China and South Africa) BRICS Summit in South Africa, finance ministers met to discuss the proposition of the “BRICS bank” to rival western financial institutions such as the IMF (International Monetary Fund) and the World Bank. Finance Minister of South Africa, Pravin Gordhan, stated that the discussions were favorable and that they had made “good progress”. It is expected that, leaders will announce the details of the new BRICS Bank when the summit reconvenes later today. This move marks a key step forward for the BRICS who require a bank that exemplifies the growing hold the BRICS have on the world economy. Details of the BRICS bank to be outlined this morning include structure and governance of the bank as well as how the headquarters will be defined. The official seed capital is estimated at $50 billion dollars into the bank. The BRICS bank would make it easier for countries to finance infrastructure projects which were possibly risky. Further, the BRICS bank would redress the issues of African and developing country finance coming from the west which currently accounts for 80%. In bilateral meetings, which also took place yesterday, Brazil and China have agreed to trade of approximately $30 billion (in their own currencies). This agreement by Brazil and China reiterates the initial proposal of the BRICS countries desire to shape the economic landscape in the future. In bilateral meetings between China and South Africa, $1.5 billion will be invested into the interbank bond market by the reserve bank. This move illustrates the change in South Africa’s trade patterns with China now a more integral part of trade relations than ever.
South Africa’s minister of finance, Pravin Gordhan with Minister of Finance of India, Chidambaram Palaniappan at the 5th BRICS summit held in Durban, South Africa at the Inkosi Luthuli International Conference Centre (Adapted from the official BRICS5 website).
The mobilization of the BRICS bank being outlined today highlights and reiterates President of South Africa, Jacob Zuma’s words that “BRICS is not a talk show”: The bank will allow for developing countries for more unity and greater economic growth. He went on further to state that the BRICS can be described as “a new paradigm for establishing a more equitable global governance model” at the dinner on Tuesday night of the summit. Even though the formation of the BRICS bank is moving steadily ahead: the initial starting capital of $50 billion may be scaled back as Russia, for example, believes that a cap of $10 billion should be placed as an initial contribution. Even though, the bank will not be up and running for a few more years, direction and focus are likely to be established in Durban for the BRICS bank. It is just a few more hours, and we will know the exact details taken by finance ministers.
More on BRICS5 here.
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