A BRICS Development Bank is a clear indicator that the bi-polar political world is long gone. The Washington Consensus ruled the world for long decades, even if it was somewhat countered by the Soviet bloc. The global political power relations used to be based on mirroring asymmetrical economic power. But as the economic production sites moved overseas, the recipient countries gained legitimate leverage in financial management. The IMF and the World Bank have been the financial arms of the developed world – the U.S. and Western Europe. The banking institutions operated in the developing world by offering assistance and money for cash needing states. Financial help did not arrive with no strings attached. The recipient Governments were forced to obey strict public finances readjustments.
BRICS is a group of five powerful states. ‘Emerging’ is not an adequate descriptive term anymore. Brazil, Russia, India, China, and South Africa are among the biggest markets and biggest producers in the world. The first four states decided in 2006 to form an economic association and South Africa joined the alliance during the next year. South Africa might need support soon, because the recent mass strikes will probably influence the GPD.
What gathers the five powerful states together is a strong discontent with how the banking institutions are organized. The U.S. have a disproportionate power in deciding how the world financial matters should be handled. Each year the group gathers in one of the member’s country. This year the event took place in Fortaleza, Brazil. “International governance structures designed within a different power configuration show increasingly evident signs of losing legitimacy and effectiveness,” the BRICS group stated on Tuesday in the Fortaleza declaration.
BRICS Development Bank as an alternative to the present financial structure
The summit takes place annually in a different member state. This year’s meeting took place for the first time in Brazil, thus ending a full round. BRICS 2.0, as it is called by Marcos Troyjo, professor of international and public affairs at Columbia University in LAtimes.com, will start by assembling an institutional framework. The five political leaders signed an agreement to create a new development bank. The starting capital will be $50 billion, but the members are following to double the sum after a while. The capital will function as a “Contingency Reserve Arrangement” for developing countries. The headquarters of the new banking institutions will be in Shanghai and the first president will be Indian. It remains to be seen how the World Bank will adapt its policies after finding itself in the same field with a competitor, BRICS Development Bank.