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article imageBRICS countries agree to launch rival development bank

By Ken Hanly     Mar 27, 2013 in Politics
Durban - The BRICS group of countries consisting of Brazil, Russia, India, China and South Africa have reached an agreement to set up their own development bank in competition with the IMF and World Bank.
After meeting with his counterparts in the four other BRICS countries, the South African Finance Minister said that the deal was done. Statistics show that the BRICS group of countries now accounts for 25% of global GDP and an even greater 40% of global population.
China has the largest GDP worth $8.25 trillion in 2012. The growth rate in China is estimated by the IMF this year to be about 8.5% much larger than most countries. China also has the most people of any country at 1.34 billion.
Brazil's GDP for 2012 was $2.425 trillion, the seventh largest in the world but last year growth was sluggish at just one per cent. Russia is the world's ninth largest economy with a GDP in 2012 of $1.953 trillion. India, with a population of 1.24 billion, a larger population than either Brazil or Russia, is only the tenth largest economy in the world with a 2012 GDP of $1.946 trillion. South Africa, has the smallest economy of the group at a GDP of only $390 billion last year and a population of only 50.5 million.
While the agreement has been made, important details have not been finalized. Russian Finance Minister said that the location of the bank and funding still needed to be finalized. There are also still disputes about exactly what the bank will do. Each country is trying to ensure that the bank will serve their interests and that they will receive an equitable return on the expected initial investment of about $10 billion each. A report in Al Jazeera speaks of the meeting as failing to launch the bank. While this is true, there does seem to be an agreement even though the actual launching of the bank may be some time in the future. Some had hoped to actually launch the bank with an initial $50 billion infrastructure at the summit.
Other agreements were made as well, including an agreement by China and Brazil to do billions in trade using their own local currencies. This is an ongoing trend as more and more countries try to gain independence from the dollar and euro.
South African President Jacob Zuma saw the summit as a means of dealing positively with his own countries' problems including high unemployment. Zuma said: "BRICS provides an opportunity for South Africa to promote its competitiveness. It is an opportunity to move further in our drive to promote economic growth and confront the challenge of poverty, inequality and unemployment that afflicts our country."
Once established the bank will challenge the hegemony of institutions such as the World Bank and IMF dominated by Europe and the US. The BRICS are expected to spend almost $4.5 trillion in infrastructure over the next five years and the bank could play a key role in financing this.
China would like the bank to be in China and President Zuma would like it in South Africa. There are still disagreements too about how much each member of the group would contribute to the bank and how much control each country would have. While the next meeting in the group is far off in Brazil in 2014, the leaders will meet together this fall during the G20 meeting in Russia.
More about brics, Development banks, World bank
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