Brazil, Russia, India, China and South Africa are unlikely to agree on starting a common foreign-currency pool to ward off balance-of-payment or currency crises at a meeting next week, South African Trade Minister Rob Davies said.
Leaders of the so-called BRICS nations, which together have $4.4 trillion in foreign reserves, are due to discuss the creation of the reserve pool at their annual summit in the eastern South African port city of Durban from March 26-27.
In October, Brazilian Finance Minister Guido Mantega said the pool will be modeled on the Chiang Mai Initiative, which gives Japan, China, South Korea and 10 southeast Asian nations access to $240 billion of emergency liquidity to shield the region from global financial shocks.
“A reserve pool, I think, is still some way off,” Davies said in an interview in Cape Town today. “There won’t be very precise decisions at this particular moment. If we can find ways to insulate ourselves from the some of the shocks we have been having in global financial markets, we will be very happy to see proposals of that sort as South Africa.”
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.
At their meeting in New Delhi a year ago, BRICS leaders authorized a study into the feasibility of establishing a multilateral bank for funding projects in the developing world.
“There will be a major step forward in terms of the BRICS-led development bank,” Davies said. “When you set up a bank like this it’s not just a question of opening the doors. There are some issues about where it is going to be located, what the capital contributions are going to be, the rules of deploying that investment. These are the sort of details that are in various stages of discussion and negotiation.”
The summit in South Africa will also see the establishment of a BRICS Business Council, that will help make recommendations to political leaders about programs that can enhance trade and investment, Davies said.
Trade between the BRICS nations surged to $282 billion last year, from $27 billion in 2002, and may reach $500 billion by 2015, Brazilian government data shows.
“We have realized for some time that we can’t just be an organization that coordinates positions around the world economy or international affairs,” Davies said. “This particular summit will be a significant and important step forward in the agenda of intra-BRICS cooperation.”