BRICS to create development bank, 'mini-IMF'

BRICS leaders at the 8th G20 summit in Saint Petersburg, Russia. Left to right: Rousseff, Singh, Putin, Xi, Zuma.

FORTALEZA (AFP) – Leaders of the BRICS group of emerging powers (Brazil, Russia, India, China, and South Africa) huddled Tuesday in Brazil to launch a new development bank and a reserve fund seen as counterweights to Western-led financial institutions.

Brazilian President Dilma Rousseff welcomed the leaders of Russia, India, China and South Africa in Fortaleza on Tuesday before expanded talks with South American leaders the next day in Brasilia.

Chinese President Xi Jinping met ahead of the summit with India’s new Hindu nationalist Prime Minister Narendra Modi, who described their first face-to-face talk as a “very fruitful meeting.”

For Russian President Vladimir Putin, who visited Argentina and Cuba before coming to Brazil, the trip gives him a chance to hammer home his calls for a “multipolar” world amid tensions with the West over the Ukraine crisis.

The five leaders, including South African President Jacob Zuma, sat down at a convention center under tight security in Fortaleza, with 2,300 soldiers deployed in the northeastern beach town.

– ‘Mini IMF’ –

The summit comes as the economies of some BRICS countries, which together represent 40 percent of the world population and a fifth of the global economy, are cooling down, with Russia and Brazil expecting just one percent growth this year.

The five emerging nations unveiled in 2013 their plans to create the New Development Bank, which aims to rival the Washington-based World Bank while the reserve is seen as a “mini-IMF.”

On the eve of the summit, Putin complained about the slow pace of reform aimed at giving developing nations bigger voting rights at the International Monetary Fund.

The bank will give the BRICS the backbone of a formal structure, said Marcos Troyjo, Brazilian director of BRICLab research center at New York’s Columbia University.

“They are only taking their first steps towards a platform for building consensus on international agenda items such as rules for international trade, joint action at the UN or the WTO,” he told AFP, referring to the World Trade Organization.

The bank will have initial capital of $50 billion with each country contributing an equal share, while the reserve will have $100 billion at its disposal.

The bank is “key to foster growth for the BRICS countries,” Brazilian Industry and Commerce Minister Mauro Borges said.

For the fund, China will make the biggest contribution, $41 billion, followed by $18 billion each from Brazil, India and Russia and $5 billion from South Africa.

Despite their agreement on the need for a bank, the five countries are split on where it should be headquartered.

Shanghai is seen as the frontrunner to host the bank but South Africa insists on having it in Johannesburg. New Delhi and Moscow are the other candidates.

They are also negotiating who should be the bank’s first president.

– ‘Multipolar’ world –

Modi and Xi met before the summit and agreed on the need to resolve a decades-old border dispute

Modi “stressed the importance of strengthening mutual trust and confidence, and maintaining peace and tranquility on the border,” the Indian government said in a statement.

The meetings give Putin his first international summit since being kicked out of the G8 group of industrialized nations over the Ukraine crisis.

“Together we should think about a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies,” Putin told Russia’s ITAR-TASS news agency.

The United States is threatening to impose new economic sanctions on Russia over accusations that it is backing pro-Moscow separatist rebels in eastern Ukraine.

The talks in Fortaleza will open a series of marathon summits and bilateral meetings in Brazil.

After the BRICS meet with South American presidents in Brasilia on Wednesday, Xi will launch the China-Latin America forum, highlighting Beijing’s growing interests in a region perceived as the backyard of the United States.