Dollar killed as BRICS bank becomes reality

Brasília (AFP) - The BRICS group of emerging powers met Wednesday with South American presidents as they justified the creation of a development bank seen as an alternative to Western-dominated global financial organizations.




The leaders of Brazil, Russia, India, China and South Africa held closed-door talks in Brasilia with counterparts from Argentina, Chile, Colombia, Ecuador, Venezuela and other Latin American nations.

The gathering follows a BRICS-only summit Monday in the seaside city of Fortaleza, where the five nations agreed to create the $50 billion bank for infrastructure projects and a $100 billion crisis reserve fund described as a "mini-IMF."

Brazilian President Dilma Rousseff insisted that the BRICS were not seeking to distance themselves from the Washington-based International Monetary Fund.
"On the contrary, we wish to democratize it and make it as representative as possible," she told reporters following talks with Indian Prime Minister Narendra Modi before joining other leaders.
Emerging and developing nations have been frustrated at the slow pace of IMF reform aimed at giving them bigger voting rights within the institution.


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Russian President Vladimir Putin (R) talks to his Foreign Minister Sergei Lavrov talk during the BRI …

While the BRICS bank and fund will benefit the group for now, Rousseff has left open the possibility of using them to aid other developing nations, notably debt-ridden Argentina.
Argentina is at risk of defaulting on $1.3 billion in debts after losing a US Supreme Court battle with hedge funds seen as "vultures" by Buenos Aires.

"We need development banks that act as tools to finance infrastructure works and increase competitiveness, unlike development banks with the extortionist tools of developed nations," Argentina's cabinet chief Jorge Capitanich said before President Cristina Kirchner traveled to Brazil.
It could take two years, however, for the institutions to be operational because they have to be ratified by the legislatures of each BRICS nation, Brazilian officials say.



Chinese media hailed the creation of the BRICS bank, which will be based in Shanghai, blaming the West for flaws in the global financial syste

"The plans of the emerging-market bloc of BRICS to establish a development bank usher in a long-awaited and helpful alternative to the Western-dominated institutes in global finance," China's official Xinhua news agency said in an editorial.

After Wednesday's talks, Chinese President Xi Jinping will spend one more day in Brazil to launch a China-Latin America forum with leftist leaders including Cuban President Raul Castro.
The meetings represent a new push by Beijing to gain clout in a region traditionally seen as a US backyard.

China's massive purchases of commodities and exports of manufactured goods to the resource-rich region have boosted its two-way trade with Latin America to a total of $261.6 billion last year.

The meetings are also another opportunity for India's Modi to present himself to the world.
For Russian President Vladimir Putin, the talks give him a platform following his country's exclusion from the G8 group of industrialized nations over Moscow's annexation of Crimea from Ukraine.

The BRICS leaders were joined by South American presidents including Chile's Michelle Bachelet, Venezuela's Nicolas Maduro, Colombia's Juan Manuel Santos and Ecuador's Rafael Correa.

BRICS shake up global economic architecture






By Jeremy Tordjman 20 hours ago






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By creating their own multilateral financial institutions, the BRICS emerging-market powers are shaking up global economic governance but remain far from dismantling the post-war system dominated by the West.




For the past 70 years, the International Monetary Fund and the World Bank have been the pillars of the world's economic system, coming to the rescue of countries in trouble and supporting development projects, respectively.

But the Bretton Woods institutions are regularly criticised for their inability to reflect the growing and important contributions of the major emerging economies to the global economy.
China, the world's second-largest economy, continues to have just slightly more voting power in the IMF than Italy, about five times smaller.

And, since their creation in 1944, the IMF and the World Bank have only been led by Americans and Europeans.

"Broader global governance reforms have become stalled, despite the many commitments made by advanced economies to emerging markets to give them a more prominent role in international financial institutions and other international forums," said Eswar Prasad, a trade policy professor at Cornell University and a former IMF expert.

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(L to R) Russian President Vladimir Putin, India's PM Narendra Modi, Brazilian President Dilma R …

In this context, the launch Tuesday of a development bank and an emergency reserve fund by the BRICS -- Brazil, Russi

"If the existing institutions were doing their jobs perfectly, there would be no need to go to the trouble of creating a new bank, a new fund," said Paulo Nogueira Batista, who represents Brazil and 10 other countries at the IMF, in an interview.

The mere creation of the two BRICS institutions sends a strong signal to Western powers, where some doubt the ability of the five powerhouses to surmount their individual needs and ambitions.

The launches "are significant actions that represent a game changer as they turn statements and rhetoric about cooperation among these countries into reality," Prasad said.
Still, many areas of uncertainty cloud the new BRICS structures, giving the IMF and the World Bank a long lead on their fledgling rivals.

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Chinese President Xi Jinping (C) shakes hands with Russian President Vladimir Putin (L) and Indian P …

- Battles for influence -
For now, only the BRICS countries will be able to draw from the $50 billion in the New Development Bank and $100 billion in the Contingent Reserve Arrangement.
However, proof of the new institutions' effectiveness will come when other countries knock at their door for money.

"Will the BRICS take the financial risk to lend to other countries? And what conditions will they impose?" said an IMF official, who spoke on condition of anonymity.
Accustomed to bailing out a country, and being reimbursed, in exchange for austerity conditions, the IMF has the kind of expertise that "doesn't happen overnight," the official said.

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China's President Xi Jinping (L) is welcomed by his Brazilian counterpart Dilma Rousseff at Plan …

Some also have concerns that the BRICS institutions -- dominated by China -- will be less careful about safeguarding the environment or fighting corruption when they make their financing deals.

Aware of their current limitations, the BRICS made a point to say they were working closely with the IMF. Some of their financing would be available only to countries already receiving Fund assistance.

Dilma Rousseff, the president of Brazil, said the creation of the BRICS institutions did not mean her country was moving away from the IM

"We have not the least interest in distancing ourselves from the IMF," she said. "On the contrary, we wish to democratize it and make it as representative as possible."
Unsurprisingly, the Bretton Woods institutions responded with offers of cooperation.
The IMF managing director, Christine Lagarde, said in a statement Wednesday that her staff would be "delighted" to work with the BRICS team on the reserve fund.

The World Bank, facing other new development rivals and undergoing a major internal restructuring, welcomed the arrival of an "invaluable partner" in the battle against poverty, a bank spokesman told AFP.

This display of friendliness, however, could in time give way to rivalries and battles for influence in the corridors of the 188-nation institutions, based in Washington.
"The new institutions aren't created against anyone," said Nogueira Batista, the IMF representative.

"But they are a first step toward a multilateral world."

http://news.yahoo.com/brics-shake-global-economic-architecture-035928214.html;_ylt=AwrBJR4yvstTVSEAPIbQtDMD

I would say the reports of the dollar's demise is somewhat exaggerated.