March 18 (Bloomberg) -- Brazil, Russia, India, China and South Africa will move toward setting up a development bank during a summit next week to speed up the makeover of the world’s “aging” financial system, a Kremlin envoy said.
Leaders of the so-called BRICS group of the world’s biggest developing economies will discuss the size of the bank’s starting capital, said Mikhail Margelov, President Vladimir Putin’s envoy to Africa. An agreement on the exact amount of resources to be committed isn’t likely and Russia favors capping each side’s contribution to $10 billion at first, he said March 15 in an interview in Moscow.
“Better we start with something small and beautiful,” said Margelov, who’ll join Putin at the March 26-27 summit in South Africa. “Our strategic goal is to transform the aging international financial architecture.”
Setting up a development bank is part of a push to win greater influence in international institutions to match the BRICS’ rising economic heft. The group of nations, which accounts for more than 40 percent of the world’s population, authorized a study into the feasibility of establishing a multilateral bank for funding projects in the developing world at a summit in New Delhi last year.
Goldman Sachs Group Inc.’s Jim O’Neill coined the BRIC term in 2001 to describe the four nations that he estimated would equal the U.S. in joint economic output by 2020. The BRIC nations held their first summit in 2009 and invited South Africa to join the group in December 2010.
Before next week’s gathering in Durban, Chinese President Xi Jinping will visit Moscow on March 22-24. He’ll meet with President Vladimir Putin to discuss “deepening cooperation” within international groups, including the BRICS, according to a statement published today on the Kremlin website.
A framework agreement that BRICS leaders plan to sign in Durban will outline a strategic interest shared by the five countries to invest in infrastructure, energy and telecommunication projects, Margelov said. South Africa is proposing investing in construction of a rail link to Namibia through Botswana, he said.
Another accord may be signed on cooperation between the nations’ stock exchanges to unify trading platforms and time standards, according to Margelov, who also heads the international affairs committee of Russia’s upper house of parliament.
Last March, Brazil’s Bovespa Index, Russia’s Micex Index, the BSE India Sensitive Index, Hong Kong’s Hang Seng Index, the Hang Seng China Enterprises Index and South Africa’s JSE Top40 Index began trading futures based on each other’s benchmark stock indexes.
The countries also plan to agree on creating a “virtual pool of reserves” to provide financial support in case of necessity, Margelov said. The stockpile will be in place until a BRICS bank is created, he said.
Brazilian Finance Minister Guido Mantega said in October that the pool will be modeled on the Chiang Mai Initiative for Japan, China, South Korea and 10 Southeast Asian nations. Those countries have $240 billion of emergency liquidity on tap to shield the region from global financial shocks after the funding was doubled last year.
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