Leaders of the BRICS nations
(Brazil, Russia, India, China and South Africa) meeting in Durban have been
discussing the formation of a new development bank to “help the Brics economies
to co-operate with other markets and developing countries in the future”. These
nations have concluded that the formation of such international organization is
feasible and have started negotiating to establish the Brics-led new
development bank. The bank, however, would perform activities similar to the
World Bank, such as provision of loans for investment in infrastructure and
other long term development projects, and under the rule of rapidly-growing and
influential economies (such as Russia and China), frictions between these IOs
could possibly arise.
Russian President Vladimir
Putin highlighted the economic success of each Nation, contrasting the Brics-nation´s
common annual economic growth rate of 4% in 2012, compared to the 0.7% of the
biggest seven financial countries. The Russian President also emphasized the
economic potential of the group and called for creation of incentives for
business, so to increase the volumes of mutual trade, investment, and broadening industrial and
technological co-operation.
The creation of a new development bank, however,
involves several issues that may arise in both markets, and the international
setting. The creation of an international financial institution could possibly
increase dissent among organizations with similar roles, undermining the
authority of one of the parties in the case of a trade dispute between
countries “protected” by the new development bank and those that are not. That,
however, may also not hold true at all since the creation of such institution
has suggested the importance that Brics states assign in growing closer ties.
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