BRICS Bank: Presidency to India; HQ Shanghai Jul 17, 2014 Leaders of the five BRICS nations agreed on the structure of a $50 billion development bank by granting China its headquarters and India its first rotating presidency. Brazil, Russia and South Africa were also granted posts or units in the new bank. The leaders also formalized the creation of a $100 billion currency exchange reserve, which member states can tap in case of balance of payment crises. Both initiatives, which require legislative approval, are designed to provide an alternative to financing from the International Monetary Fund (IMF) and the World Bank, where BRICS countries have been seeking more say. The measures coincide with a slowing of economic growth in the five countries to about 5.4% this year from 10.7% in 2007 India and South Africa had vied with China to host the headquarters of the bank, dubbed the New Development Bank. India gave in after it was reminded that his country’s previous administration had agreed to Shanghai as the bank’s headquarter. BRICS decided in favour of Shanghai because the city offers better infrastructure, opportunities to capture private funding, and is home to more investors than the competitors. Each member country got something out of the deal. The first chairperson of the Board of Governorswill be from Russia, while the first chairperson of the Board of Directorswill be Brazilian. South Africa will establish an African Regional Center for the bank, which may not get off the ground for another two years. Unlike the IMF and World Bank, which are managed by Europeans and Americans, the BRICS bank is quite democratic. Each member country has the right to withdraw different amounts from the joint currency reserves. China can withdraw half the amount it earmarks or $20.5 billion. Brazil, Russia, and India may withdraw the same amount they commit or $18 billion, while South Africa can tap $10 billion, twice its contribution. The biggest gainer among the BRICS and its newly created bank may be South Africa, as it stands to gain financial expertise, investment and trade. The BRICS have evolved from the original term coined in 2001 by then Goldman Sachs Group Inc. economist Jim O’Neill to describe the growing weight of the largest emerging markets in the global economy. In 2011, South Africa joined to give the BRICS a broader geographic representation.
Posted on: Thu, 17 Jul 2014 06:16:26 +0000
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