Since 2009 the BRICS countries, the most important emerging economies, started to meet every year to discuss and cooperate on global economic, political and social issues. The last summit held in Brasil in the city of Fortaleza last July 2014 set the scene for the creation of the BRICS Development Bank and the Bank should be fully operational by the end of 2015. The establishing agreement will enter into force once the BRICS countries will have deposited the instruments of acceptance, ratification or approval have been deposited, in accordance with Article 48 of the same agreement available at the following address. We believe that a decision on the launch of financing the first project will be made by the end of the year (2015). We have set this goal before us, but of course no one can give a 100-percent guarantee that this will be accomplished,” said Russian Deputy Finance Minister Sergei Storchak (pictured on the right).
|Population and economic power of BRICS economies|
Basic excerpt from the Agreement of the Bank
- Purpose (Art.1) The Bank shall mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development. To fulfill its purpose, the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments. It shall also cooperate with international organizations and other financial entities, and provide technical assistance for projects to be supported by the Bank.
- Functions (Art. 3 Annex containing the Articles to the Agreement)
To fulfill its purpose, the Bank is authorized to exercise the following functions:
(i) to utilize resources at its disposal to support infrastructure and sustainable development projects, public or private, in the BRICS and other emerging market economies and developing countries, through the provision of loans, guarantees, equity participation and other financial instruments;
(ii) to cooperate as the Bank may deem appropriate, within its mandate, with international organizations, as well as national entities whether public or private, in particular with international financial institutions and national development banks;
(iii) to provide technical assistance for the preparation and implementation of infrastructure and sustainable development projects to be supported by the Bank;
(iv) to support infrastructure and sustainable development projects involving more than one country;
(v) to establish, or be entrusted with the administration, of Special Funds which are designed to serve its purpose.
- Headquarters (Art. 4 Annex containing the Articles to the Agreement)
b) The Bank may establish offices necessary for the performance of its functions. The first regional office shall be in Johannesburg.
The bank will rival the US- and European-led World Bank and its private lending affiliate, the International Finance Corporation, which have dominated development finance since the second world war. The Brics bank is positioned as a financial institution that will provide developing countries with alternative funding minus the punishing strings attached to World Bank lending, which strip recipient countries of the power to make their own policies. It also promises to make lending processes for developing countries faster, simpler and cheaper.
Developing countries have long failed to get industrial nations to either give them a bigger say in decision-making at the World Bank and IMF, or to get these institutions to ease up on punishing and inappropriate structural adjustment programmes (that wealthy countries themselves would never implement in their own economies) in return for funding. The new bank and the contingency fund are therefore the first real and practical attempts by developing countries to create a monetary, development-finance and trade alternative to the IMF, World Bank and the dominance of the US dollar.
The mere presence of a Brics bank that does not adhere to the structural adjustment philosophy of the World Bank and IMF could strengthen the hands of African governments to produce more independent – and relevant – national development policies, rather than the “one size fits all” approach enforced by traditional lenders.
The mere presence of a Brics bank that does not adhere to the structural adjustment philosophy of the World Bank and IMF could strengthen the hands of African governments to produce more independent – and relevant – national development policies, rather than the “one size fits all” approach enforced by traditional lenders. The Brics bank could also help Africans to secure better investment deals in their negotiations with traditional multilateral banks and the private sector. However, there is no guarantee that a Brics bank would not attach conditions as onerous as those of the World Bank or other development banks – or that it would prioritise the development and infrastructure policies important to African economies, rather than just the Brics economies. Most current development banks in individual states, such as the Brazilian development bank, lend at market rates to African countries. Headquarters