Despite Major Cracks, BRICS Development Bank to Become Operational Next Year
A new development bank first proposed two years ago by the BRICS nations — Brazil, Russia, India, China and South Africa – will become fully operational and start financing energy projects in 2016.
The five nations see the bank and its $100 billion currency reserve pool as an alternative to international financial institutions like the IMF and World Bank that, they claim, are dominated by the U.S.
Acting as a spokesman for the BRICS, Russian President Vladimir Putin said, “The New Development Bank will be financing large-scale transport and energy projects and industrial development,” adding that the first projects would be launched next year and that Russia would by the end of the year “put together a blueprint mapping out investment cooperation” between the five countries.
“We’ve conducted consultations with our business circles and have already put some 50 projects and business initiatives onto the roadmap,” Putin told the media, noting the “initiatives” included proposals to establish an “energy association and an energy research center.”
Russia and China have agreed to use each others’ currencies to promote bilateral trade and investment, with Putin saying that Moscow would be keen to expand the use of national currencies with other BRICS countries.
“I think that such development with India, Brazil and South Africa would be interesting and could no doubt lift the level of trade turnover,” he said. “A pool of nominal currency reserves, with capital of $100 billion, will give us an opportunity to react to financial market fluctuations in a timely and appropriate manner.”
Putin’s remarks were made at the recent BRIC conference held in the Russian city of Ufa, about 800 miles east of Moscow.
Despite the Russian leader’s optimism, the announcement comes as India is seen as the only bright spot among the bloc’s five members. Forecasts predict a 7 percent growth surge in the nation’s economy this year as the country continues to see its middle class expand and dismantle its Byzantine regulatory policy mechanism to attract foreign investment.
Russia, on the other hand, is facing a third straight year of sharp economic decline after being slapped by the slump in global oil prices and continued Western economic sanctions resulting from Moscow’s annexation of the Crimea and its incursion into neighboring Ukraine.
China, which used to be the most dynamic of all BRICS economies, is paying the penalty for Beijing’s propping-up of an over-abundance of anti-competitive state-owned enterprises with a resulting decline in critical foreign investment putting the brakes on double-digit growth.
Brazil has hit rock bottom of near zero per cent gross domestic product (GDP) growth due to nagging recession, failing consumer demand, a barrage of corruption scandals in state-run corporations, and a drop in the prices of several key exportable commodities – the same formula that’s dropped South Africa to second place behind Nigeria as Africa’s most powerful economy.