The announcement of a new BRICS Bank displays the desire of emerging economies to move away from Washington D.C.-style lending institutions. But between India’s bureaucratic efficiency and China’s indifference to humanitarian, environmental and regional concerns, they resemble John F. Kennedy’s tart characterisation of the very place they hope to leave behind. Much work lies ahead for the creators of these new multilateral financial institutions before the first loan can be made.
How were they able to agree?
Simply reaching sufficient agreement to announce the new BRICS Bank represents a significant achievement for the six-year-old BRICS group. While it may seem silly to organise a serious international grouping based on a clever acronym, the BRIC countries are the four largest economies in the developing world. They have economic heft, but do they have much in common?
Unlike, say, OPEC, their economic fundamentals differ dramatically. Russia, Brazil and South Africa export different commodities, while China exports manufactured goods and India exports services. Two are current account surplus and three are deficit countries.
What they most need to succeed is trust. Russia and India have long histories of conflict with China. Brazil and Russia are not famous for being creditworthy. South Africa is a solid neutral party, but also, frankly, a lot less significant than the other members. So apparently their joint desire to plant a flag on the global economy sufficiently overcame mutual differences.
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