The five BRICS emerging-market nations will need more time to set up a new development bank as they work out details on funding and operations, Russia’s finance minister said.
“An intention to create a BRICS bank will be mentioned in the leaders’ communique,” Finance Minister Anton Siluanov said in an interview yesterday after a meeting with his BRICS counterparts. “As an idea it was positively discussed, but we still need to work on the mechanism. There was a proposal to declare capital of $50 billion but to pay $10 billion. Divided by the five members this will be $2 billion each.”
The so-called BRICS nations -- Brazil, Russia, India, China and South Africa -- have been studying the viability of the bank for a year, and their leaders are due to sign an accord on its establishment at a summit today. In the run-up to the gathering in Durban, South Africa, officials from Brazil and Russia indicated each country could contribute $10 billion.
The five nations, which have 43 percent of the world’s population and total foreign-currency reserves of $4.4 trillion, are seeking greater financial sway to match their rising economic power. India proposed the bank a year ago amid criticism from developing nations that existing multilateral lenders aren’t doing enough to address under-development and Western nations have too much say over their management.
“There are lot of nuances which we will solve at the next summit,” Dmitry Peskov, a spokesman for Russian President Vladimir Putin, told reporters in Durban today. “All the talk now is about creating the bank in general terms.”
Any new institution is unlikely to achieve much in the near-term, according to Andrew Kenningham, an economist at Capital Economics Ltd. in London.
“It will not be easy to reach agreement on the bank’s capital contributions and governance structure,” he said in e-mailed comments yesterday. “If and when it gets up and running, it may simply duplicate or substitute for funds led by the Chinese Development Bank.”
Goldman Sachs Asset Management Chairman Jim O’Neill coined the BRIC term in 2001 to describe the four emerging powers he estimated would equal the U.S. in joint economic output by 2020. Brazil, Russia, India and China held their first summit four years ago and invited South Africa to join their ranks in December 2010.
“We are a new phenomenon in a world that urgently requires a more equitable world order,” South African President Jacob Zuma said in a speech in Durban last night. “Through the BRICS partnership, we are witnessing the dawn of a new era in the global arena which is characterized by the rise of emerging markets and developing economies.”
Trade within the group surged to $282 billion last year from $27 billion in 2002 and may reach $500 billion by 2015, according to data from Brazil’s government. Foreign direct investment into the nations reached $263 billion last year, accounting for 20 percent of global foreign direct investment flows, up from 6 percent in 2000, the United Nations Conference on Trade and Development said on its website March 25.
BRICS finance ministers and central banks have reached agreement on setting up a currency crisis fund of about $100 billion, Brazilian Finance Minister Guido Mantega told reporters yesterday. He called for the new bank to be established by 2014, he said, without giving details of proposed funding.
The first project the new bank is likely to consider funding is a road and rail corridor linking Durban and Tanzania, Lionel October, the director-general of South Africa’s Trade and Industry Department, said in an interview in Durban today. The five nations will have equal shareholdings in the new bank and South Africa is the only country so far that has asked to host it, he said.