The BRICS Bank: an ‘Alternative’ to the Bretton-Woods Institutions?


Recently, the leaders of the BRICS countries – Brazil, Russia, India, China and South Africa – made a bold step in setting up an international development bank. They have agreed to raise $100 billion to that effect, with plans for the headquarters of the financial institution to be based in Shanghai, China.

This decision came after years, of intense negotiations.

According to The Guardian:

The BRICS were prompted to seek coordinated action after an exodus of capital from emerging markets last year, triggered by the scaling back of US monetary stimulus. The new bank reflects the growing influence of the BRICS, which account for almost half the world’s population and about a fifth of global economic output.

The bank will begin with a subscribed capital of $50bn divided equally between its five founders, with an initial total of $10bn in cash put in over seven years and $40bn in guarantees. It is scheduled to start lending in 2016 and be open to membership by other countries, but the capital share of the BRICS cannot drop below 55%.

 

This significant development in international economic relations has been eclipsed from global headlines by the latest eruption of the tragic Israel-Palestinian conflict and the shooting down of yet another plane of the Malaysian Airlines fleet.

Discussing the new BRICS Bank with friends online and offline raised a number of pertinent issues:

First, can China’s dominance provide the decisive leadership needed to get the BRICS Bank up on its feet, as the US did for the IMF, the World Bank and the UN in the immediate post-War era in 1945? Or will its dominance be too overbearing, and actually derail the Bank even before it takes off fully?

Second, will the China-dominated BRICS bank vis-à-vis a US-dominated Bretton Woods system reincarnate another bipolar world order? Do we even want bipolarism dominated by two competing economic and political systems, the Washington Consensus and the Beijing Consensus?

Third, will the BRICS countries successfully manage their numerous differences (and there are many – language, size, spatial differences, financial clout and variations in political systems to mention a few).

Russian President, Vladmir Putin and a representative of the South African government right behind him at a BRICS summit in 2013. Photo credit: New York Times
Russian President, Vladmir Putin and a representative of the South African government right behind him at a BRICS summit in 2013. Photo credit: New York Times

Fourth, will the establishment of the BRICS Bank provide more diverse sources of development finance for the global South? Will it further enhance South-South cooperation? Is the new development bank capable of serving as an effective competition to the US-dominated Bretton Woods institutions, to at the very least, inspire needed reforms in these multilateral institutions to make them more inclusive (in voting rights, decision-making and staff composition)? Do we want competition, diversity, or both?

Fifth, where does (sub-Saharan) Africa fit into all this? What is the African Union’s position on this new institution?

And finally, why is Nigeria not included? Why isn’t it a BRINCS or an N-BRICS Bank? After all, with a GDP of $509 billion Nigeria is Africa’s largest economy, and is over $100 billion richer than South Africa’s $372 billion economy. Although the BRICS acronym was coined years before Nigeria transitioned to Africa’s largest economy in May 2014. One still can’t help wondering whether this is the price Nigeria has to pay for its severe domestic political and security challenges.

What are your thoughts?

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10 thoughts on “The BRICS Bank: an ‘Alternative’ to the Bretton-Woods Institutions?

  1. I think Nigeria is regarded as unreliable due to its numerous domestic problems,ranging from unstable political setting,corruption and insecurity.Also, BRICS had been formed since before the recent rebasing of Nigeria’s economy,which am sure many countries do not actually trust to be factual.

  2. Hmmm I read somewhere, I think the Economist, that Nigeria was not included simply because N would “dis-rhyme” the acronym. Strange but it could be true.

  3. There was just one problem with the BRICs: no African countries were included. This was a little embarrassing. Overlooking Africa suggested that the continent was an economic irrelevance, good only for providing raw materials to the rest. It also cast doubt on the group’s claim to speak for the emerging world. Two African countries might have been candidates, Nigeria and South Africa. But only one would keep the acronym intact. And so, in 2010, the club of BRICs became the BRICS.

    http://www.economist.com/blogs/economist-explains/2013/03/economist-explains-why-south-africa-brics

  4. Yeah you are rights.you raised all the pertinent questions but let’s be hopeful.As for Nigeria the leadership has itself to blame and it wil continue to just be giant on paper as long as the leadership continue to be clueless in addressing its myriad of internal problems.

  5. BRIC was originally coined to represent group of superpower emerging economies on the premise of demography, geography and economic growth by Jim O’Neil. S/A, which by all account, does not meet the conditions was drafted into the group bythe member nations to give it more a facade intercontinetal coloration. Nigeria is already classified with MINT, the next emergying economies superpower by the same proponent of BRIC. I hope MINT get together to propose similar institution to alter the West and East dichotomy.

  6. The charisma and personal qualities of a leader determines in many instances the fate of nations and movements. Charles de Gaul of post war France comes to mind. if the French had a less endowed leader, it may not have made the security council membership. in addition to our natural endowments we need an inspiring and charismatic leader, who would serve as a visual representation of our greatness who would ensure our greatness is ever in the consciousness of global public opinion, whose personal greatness translates to our own greatness (Nelson Mandela). This is particularly relevant for a nation like ours that has a negative image (419, Kidnappings, piracy and now terrorism).
    Clubs, particularly new ones, need good publicity!

  7. To be candid I believe the BRICS mission is achievable if they would systematically and Logically translate their decisions practically.

    Adding Nigeria into the BRICS would had been a strategic mistake. Nigeria may have all it takes to be member of the new alignment but surely it (Nigeria) can be use to destroy the alignment. The BRICS are alignment of those countries that seriously want to develop not only their States but also control the world.

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