The leader of five of the world’s largest emerging markets will showcase a new currency reserve fund and development bank. Critics say neither is enough to revive the group’s waning clout.
Brazil, Russia, India, China and South Africa, known as the BRICS, will approve the creation for the $100 billion reserve fund and $50 billion bank at a July 15-16 summit in Brazil’s coastal city of Fortaleza and the capital Brasilia.
The initiatives are born out of frustration with a lack of participation in global governmance, particularly in the World Bank and International Monetary Fund, said Arvind Subramanian, senior fellow at the Peterson Institute for International Economics. The measures aren’t big enough to boost growth or cohesion in the group as foreign investor sentiment sours and member states focus on issues close to home, such as Brazil’s elections, the conflict in Ukraine and new economic policy plans in India.
“It’s hard to see a lot of impetus at this stage for the BRICS in general and for these initiatives in particular,” Subramanian said by telephone from Washington. “There’s going to be a lot of attention on domestic issues.”
Economic growth in the five countries is projected to average 5.37 percent this year, half the pace seen seven years ago, according to the median estimate of economists surveyed by Bloomberg. Brazil and Russia will grow 1.3 percent and 0.5 percent, respectively.
Yuri Ushakov, Russian presidential aide on foreign policy, said in an interview that the group’s growth rate is still above that of the global average and that its economic and political weight is increasing.
The BRICS have evolved from the original term coined in 2001 by then Glodman Sachs Group Inc. economist Jim O’Neill to describe the growing weight of the largest emerging markets in the global economy. In 2011, South Africa joined to give the BRICS a broader geographic representation. The group’s track record in pursuing a common agenda on the world stage has been mixed.
“It’s easier to say what the BRICS aren’t than what they are,” said Jose Alfredo Graca Lima, under-secretary for political affairs at the Brazilian Foreign Ministry.
The five countries failed to agree on a candidate to head the World Bank in 2012 and the International Monetary Fund in 2011, two posts at the heart of their demands for more say in global economic matters.
The summit is unlikely to provide a common front to push ahead global trade talks either, even though the World Trade Organization is headed by Brazilian Roberto Azevedo. Brazil itself has increased protectionist measures under President Dilma Rousseff.
“I wouldn’t say that there will be a common outcome in that sense, but certainly there will be discussion on WTO matter,” said Sujata Mehta, secretary for economic relations at the Indian Foreign Ministry.
India and South Africa have signaled they may backtrack on a trade facilitation agreement reached at the WTO talks in Bali in December 2013, wrote Carlos Braga and Jean-Pierre Lehmann, professors at Lausanne, Switzerland-based IMD business school.
Still, Indian Prime Minister Narendra Modi is unlikely to rock the boat at the Brazil summit, said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a government-backed research institute in New Delhi.
“Domestic issues are dominating his agenda, especially growth and inflation.” Bhanumurthy said.
Source from Myanmar Business Today, 24-30 July,2014