BRICS Countries to Discuss Creation of Financial Institutions with up to US$ 200 Billion in Reserves
Rio de Janeiro (08 July 2014) - The leaders of the BRICS countries (Brazil, Russia, India, China, South Africa) will meet at the VI BRICS Summit next week in Brazil to discuss the creation of a Development Bank to finance infrastructure and sustainability projects, as well as a reserve fund to assist countries of the bloc if they suffer difficulties with their balance of payments.
This information was confirmed by Ambassador José Alfredo Graça Lima, Under-Secretary-General for Political Affairs II of the Brazilian Ministry of Foreign Affairs, during a news conference held today at the João Saldanha Open Media Centre in Rio de Janeiro. “The completion of these two initiatives will carry a strong message about the willingness of the BRICS member countries to deepen and strengthen their partnerships economically and financially,” said the Ambassador.
Signing of these agreements to create the BRICS Development Bank and the Contingent Reserve Arrangement (CRA) is central to the agenda of the VI BRICS Summit, which will take place on 15 and 16 July in Fortaleza and Brasília. The Heads of State and Government of Brazil, Russia, India, China and South Africa will also hold discussions focused on development while providing for social inclusion.
The two financial institutions being discussed by the BRICS countries will work similarly to the World Bank and the International Monetary Fund (IMF), said the Ambassador.
The BRICS Development Bank, which will mirror the World Bank, will have US$ 100 billion in authorized capital to be used for financing infrastructure and sustainable development projects in the BRICS member nations and other developing countries. The BRICS countries will initially underwrite US$ 50 billion in capital to the bank, in equal parts of US$ 10 billion each.
Graça Lima also explained that other countries, investment banks and multilateral institutions may become shareholders of the bank, but that their participation will be subject to approval by the BRICS member countries. The five founding members of the new Bank will retain controlling interest should any new members be admitted. The Bank’s name has yet to be chosen, and Shanghai, Johannesburg, New Delhi and Moscow are the four possible locations for its headquarters, he added.
The Contingent Reserve Arrangement (CRA), which will mirror the IMF, will receive an initial subscribed capital of US$ 100 billion and function as an additional buffer of defense for BRICS countries facing difficulties with their balance of payments. China will contribute US$ 41 billion, Brazil, Russia and India will each contribute US$ 18 billion and South Africa will contribute US$ 5 billion to the initial capital.
The arrangement also resembles the Chiang Mai Initiative (formed by Asian countries), said the Ambassador. Access to resources will depend on assessments conducted by two different committees: a board of governors of the fund and a technical advisory board.
According to the Ambassador, the choice of social inclusion as a theme for the Summit (the first at a BRICS Summit) will help reinforce the importance the BRICS leaders place on achieving the UN Millennium Development Goals – the social challenges outlined by the United Nations in 2000 to be met by 2015 – through economic growth or inclusive social policies implemented by their governments.
In addition to the two primary financial agreements to be signed, the VI BRICS Summit will also produce the Fortaleza Declaration, which will consolidate the common views of the group on issues of the international agenda and on matters of cooperation within the BRICS. The countries are also studying the possibility of launching a platform to foster the development of common methodologies for social indicators. Graça Lima added that as the new chair of the BRICS, under the rotating policy of the group, Brazil will lead the implementation of the action plan to be approved in Fortaleza, which will incorporate various activities to be undertaken until the next Summit, to be held in Russia in 2015.
The Summit will be preceded on 14 July 2014 by a number of events including the Finance Ministers Meeting; the Central Bank Governors Meeting; the Ministers of Trade Meeting; the Meetings of the BRICS Business Forum and Business Council; and the BRICS Financial Forum (the meeting of National Development Banks of the group, to be organized by Brazil’s BNDES).
On 15 July 2014, the Summit will hold its first private work session in Fortaleza, during which the leaders of the BRICS will discuss international issues of political, economic and financial nature. The session will be followed by the event’s official photo and a working lunch. The afternoon begins with the official signing ceremony for the activities of the Summit (open to the press), followed by a plenary session. At the end of the day, the leaders will be invited to attend a cultural presentation.
On 16 July 2014 in Brasília, the Heads of State and Government of the BRICS countries will meet with Presidents of South American countries.
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