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Author Topic: BRICS set up bank to counter Western hold on global finances  (Read 1043 times)

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socafighter

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BRICS set up bank to counter Western hold on global finances
BY ALONSO SOTO AND ANTHONY BOADLE
FORTALEZA Brazil Wed Jul 16, 2014 4:56am IST


(L-R) Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, Chinese President Xi Jinping and South African President Jacob Zuma smile at a group photo session during the 6th BRICS summit in Fortaleza July 15, 2014. REUTERS-Nacho Doce



(Reuters) - Leaders of the BRICS emerging market nations launched a $100 billion development bank and a currency reserve pool on Tuesday in their first concrete step toward reshaping the Western-dominated international financial system.

The bank aimed at funding infrastructure projects in developing nations will be based in Shanghai and India will preside over its operations for the first five years, followed by Brazil and then Russia, leaders of the five-country group announced at a summit.

They also set up a $100 billion currency reserves pool to help countries forestall short-term liquidity pressures.

The long-awaited bank is the first major achievement of the BRICS countries - Brazil, Russia, India, China and South Africa - since they got together in 2009 to press for a bigger say in the global financial order created by Western powers after World War Two and centered on the International Monetary Fund and the World Bank.

The BRICS were prompted to seek coordinated action following an exodus of capital from emerging markets last year, triggered by the scaling back of U.S. monetary stimulus. The new bank reflects the growing influence of the BRICS, which account for almost half the world's population and about one-fifth of global economic output. The bank will begin with a subscribed capital of $50 billion divided equally between its five founders, with an initial total of $10 billion in cash put in over seven years and $40 billion 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 percent. The contingency currency pool will be held in the reserves of each BRICS country and can be shifted to another member to cushion balance-of-payments difficulties. This initiative gathered momentum after the reverse in the flows of cheap dollars that fueled a boom in emerging markets for a decade. "It will help contain the volatility faced by diverse economies as a result of the tapering of the United States' policy of monetary expansion," Brazilian President Dilma Rousseff said.

"It is a sign of the times, which demand reform of the IMF," she told reporters at the close of the summit.

China, holder of the world's largest foreign exchange reserves, will contribute the bulk of the contingency currency pool, or $41 billion. Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion. If a need arises, China will be eligible to ask for half of its contribution, South Africa for double and the remaining countries the amount they put in. Negotiations over the headquarters and first presidency were reached at the eleventh hour due to differences between India and China. The impasse reflected the trouble Brazil, Russia, India, China and South Africa have had in reconciling stark economic and political differences that made it hard for the group to turn rhetoric into concrete action.

"We pulled it off 10 minutes before the end of the game. We reached a balanced package that is satisfactory to all," a Brazilian diplomat told Reuters.

Negotiations to create the bank dragged on for more than two years as Brazil and India fought China's attempts to get a bigger share in the lender than the others.

In the end, Brazil and India prevailed in keeping equal equity at its launch, but fears linger that China, the world's No. 2 economy, could try to assert greater influence over the bank to expand its political clout abroad. China, however, will not preside over the bank for two decades.

Facing efforts by leading Western nations to isolate Russia for annexing Crimea and stirring revolt in eastern Ukraine, the BRICS summit provided President Vladimir Putin with a welcome geopolitical platform to show he has friends elsewhere, economic powers seen as shaping the future of the world.

The BRICS abstained from criticizing Russia over the crisis in Ukraine and called instead for restraint by all actors so the conflict can be resolved peacefully.

(Editing by Tom Brown and Jonathan Oatis)


socafighter

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Re: BRICS set up bank to counter Western hold on global finances
« Reply #1 on: July 17, 2014, 09:44:47 AM »


American dominance being threatened ....interesting

Offline ribbit

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Re: BRICS set up bank to counter Western hold on global finances
« Reply #2 on: July 21, 2014, 02:21:39 PM »


American dominance being threatened ....interesting

that article denominating all de amounts in american dollars. america still dominating boss.

Offline Tiresais

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Re: BRICS set up bank to counter Western hold on global finances
« Reply #3 on: July 21, 2014, 04:57:48 PM »
 


American dominance being threatened ....interesting

that article denominating all de amounts in american dollars. america still dominating boss.

Indeed, US dollar is still the mostly undisputed international currency.

BRIC(S) is still massively dominated by China though - I did a lecture on the emerging BRIC (or briCs) countries for my 1st year undergrads last year. If you're interested the 2012 BRIC report it's here; http://www.bricsindia.in/chapters.html Chapter 15 is where I pulled most of my graphs. China dominates trade between the nations, accounting for a minimum of 60% and high of 85% of intra-BRIC bilateral trade.

Offline Toppa

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Re: BRICS set up bank to counter Western hold on global finances
« Reply #4 on: July 22, 2014, 07:31:48 PM »
Is it certain that the currency will be in US dollars or was it only reported in US dollars in the article?
www.westindiantube.com

Check it out - it real bad!

Offline Tiresais

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Re: BRICS set up bank to counter Western hold on global finances
« Reply #5 on: July 23, 2014, 03:50:47 AM »
Is it certain that the currency will be in US dollars or was it only reported in US dollars in the article?

I've seen it reported they wish to challenge the dominating force of the dollar (but can't find the article or anything official), but it's likely they'd pick dollars to express their intent, even if all the individual currencies are the reality. Tbh dollars are usually the only currency that every country n the world has readily exchangeable, so they'd have to encourage more reserve currencies of the BRICS (still feels silly to include South Africa, but China wants their stuff...) to be held by those countries they loan to, which might be the point.

Offline ribbit

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Re: BRICS set up bank to counter Western hold on global finances
« Reply #6 on: July 23, 2014, 02:02:49 PM »
http://articles.economictimes.indiatimes.com/2014-07-20/news/51780207_1_brics-bank-new-development-bank-brics-countries

so the bretton-woods organizations moving too slow. let's see how much of the G-20 join with the NDB to gain a bigger say.

Offline Feliziano

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Re: BRICS set up bank to counter Western hold on global finances
« Reply #7 on: July 23, 2014, 09:48:37 PM »
Look what happen to Ghaddaffi when he try to get Africa and some of the Middle East countries to start using the Dinar instead of the US$ lol.
On a side note, the only countries without a Central bank are Iran, North Korea and Cuba...last 2 who came off the list were Libya and Sudan.
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Offline ribbit

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Re: BRICS set up bank to counter Western hold on global finances
« Reply #8 on: July 24, 2014, 02:31:06 PM »
Look what happen to Ghaddaffi when he try to get Africa and some of the Middle East countries to start using the Dinar instead of the US$ lol.
On a side note, the only countries without a Central bank are Iran, North Korea and Cuba...last 2 who came off the list were Libya and Sudan.

there's also the conspiracy theory out there that saddam was pushing to sell oil for euros instead of USD before he get ousted.

interestingly, the latest serious proposal to get rid of the USD as the global reserve currency was to replace it with the SDR administered by the IMF - a proposal which china was on-board with.

so is it better to replace the USD with something else or have confidence in the governance of the institution that is running the show? maybe the currency doh matter so much as the banker?