Sanya system strengthened at BRICS meet in New Delhi
The fourth BRICS Summit, an organization consisting of Brazil, Russia, India, China, and South Africa is taking place in New Delhi Thursday. This is the second consecutive BRIC Summit to be held in Asia. Their last summit was held in April 2011 in Sanya, China, where BRIC had expanded to include South Africa, making it truly global. Moreover, the solidarity of BRICS leaders has witnessed several other emerging economies showing interest in joining forces with the BRICS to redefine global post-World War II financial institutions, norms and procedures.
The past few years witnessed the exponential growth of several BRICS mechanisms, including meetings of their senior ministers, officials, bankers, academics and experts that involve nearly a dozen sectors from finance to agriculture. This makes BRICS not just an economic union but also an increasingly social and even political forum focused on comprehensive governance issues.
BRICS, however, has been cautious in its membership and in making sure its agenda stays focused on its original mandate of seeking reform of the existing financial institutions. In this regard, successive summits have put forward various proposals and this year's summit has been preceded by the most elaborate preparations ever, with multiple background negotiations. This fourth summit is now expected to outline some substantive initiatives that will include initiatives for a BRICS Development Bank for South-South Cooperation.
BRICS interlocutors have been working for creating such a single development bank for South-South monetary and financial cooperation. It is projected to facilitate intra-BRICS trade and joint investments and thereby make their growth trajectories far more autonomous of global trends.
This is expected then to strengthen their multilateral union and to elevate their international standing as emerging economic powerhouses, especially with regard to their current marginalized positions in the existing post-World War II global financial institutions.
Today, the BRICS nations are not only the fastest growing economies but also hold the largest amounts of foreign exchange reserves. China currently possesses the biggest foreign exchange reserves in the world, standing at $3.2 trillion. It is followed by Russia with $505 billion, Brazil with $355 billion and India with $307 billion, putting them fourth, sixth and seventh on the list.
By using their reserves and savings for mutual trade and investment in their own currencies, they can promote their domestic currencies. It also reduces the costs of procuring and exchanging in US dollars, which currently entraps nations into being bound by the trends in US financial markets.
But BRICS' path to such a noble initiative remains ridden with some major obstacles if not pitfalls.
To begin with, given wide differences in their relative size and stature, there could be intra-BRICS suspicions about their preferred models and procedures. Then there is also this sense that the BRICS nations are trying to distance themselves from US dollar, which is the only respected international currency so far.
The Chinese yuan has the biggest chance of achieving international recognition next. BRICS export-import banks, however, have been holding piecemeal negotiations for over two years and are now expected to sign an agreement to promote direct trade and loans in local currencies to reduce reliance on the US dollar and guard against global volatility. Such an agreement will be an important first step in empowering the BRICS Development Bank.
Based on murmurs that were heard during the selection of the last IMF boss, a European as usual, BRICS will also be discussing the on-going search for the next World Bank President, which is still widely expected to go to Jim Yong Kim, an Asian-American academic and physician, in keeping with the tradition of having a US citizen take the role.
The BRICS nations have been demanding increase in their voting rights at the IMF, but they must not restrict their future noble initiatives to such limited and retrograde motivations and justifications. India's proposal for rotating governorship of the BRICS Development Bank would be more acceptable and equitable. But BRICS should also work for a Development Bank for the entire global South, including the least developed countries. It is such larger visions that will earn their goodwill and strength as new global leaders.
BRICS should also find strength in earlier such experiments. A Bank of the South (Banco del Sur), has been in existence since 2009 among Latin American countries, including Brazil. Though it has been only a modest attempt for monetary and lending cooperation, with seed money of a mere $20 billion, its presence has created an autonomous space and offers important lessons for evolving an alternative vision with different ideological and procedural orientations.
In terms of their other priorities, infrastructure projects and intra-BRICS trade would benefit all the BRICS members, as these remain well below world standards and have great potential to grow and inject vitality into overall employment and growth in these countries. And a BRICS Development Bank would be a great initiative to lead such a transformation.
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