BRICS member-states are preparing a world banking revolution. They are planning to nominate an alternative candidate for the post of the Chairman of the World Bank for the first time in history. BRICS also demands redistribution of quotas in the International Monetary Fund in the near future and intends to study India’s initiative on creating a South-South Bank.
Representatives of Brazil, Russia, India, China and South Africa proposed a reform of the world financial system at their meeting in Mexico City which took place during the conference of G20 finance ministers and heads of central banks.
BRICS financiers are annoyed with the private rule that the head of the World Bank is always a representative of the US. They believe that candidates should be assessed based on their merits and not citizenship. BRICS member-states are convinced that it is essential to create competition for the US candidate, either from a BRICS country or from Europe. It has been decided to prepare a declaration on a coordinated position on this subject in the next two weeks. Candidates for the post of the head of the World Bank should be determined by the 23rd of March.
On the 29th of March BRICS leaders are expected to launch the mechanism of coordinating opinions on India’s proposal to create a South-South Bank. It is to become a support institution for countries with developing markets. BRICS member-states will be playing the main role in it, according to the quotas of votes. In this context they will have to assume serious financial responsibilities. The project looks promising but needs detailed studying, President of the Russian Financial Corporation Andrey Nechayev says.
“There are a lot of unanswered questions at the moment. Who is going to provide capitals for this bank? Who will be able to get money from it? There may be a lot more of those who want to take a loan than those willing to give loans. The new institution meets the requirements of world development. BRICS member-states need investments and not only cash but new technologies, methods of corporate management and innovations. At present it is not quite clear how this bank, if it ever opens, will help to solve this problem.”
In any case, India’s initiative on creating a South-South Bank is an attempt by BRICS member-states to offer their mite to the establishment of a new world financial system. They are planning to take a place in it according to their global weight. The rate of the Brazilian, Russian, Indian, Chinese and South African growing economies in world production exceeds 21% and these countries’ currency reserves exceed $4trln.
The latter fact gives these countries grounds to dispute the financial tradition set by the west. BRICS member-states intend to upgrade their role in the IMF. They are ready to discuss the strengthening of the Fund’s resource base, in particular, for helping the EU to get out of the debt crisis. At the same time, they demand redistribution of the Fund’s quotas, which means both the realignment of world financial flows and the rearrangement of votes when the IMF makes decisions. At present, almost half of the votes belong to the EU and the US, while BRICS member-states have about 10%. In 2010 BRICS raised its quota a little but its potential is still underrated. The West will keep trying to hamper the IMF reform, so as to prevent countries with growing markets from strengthening their positions. Meanwhile, the need for replenishing the IMF resource base will apparently make the management of the Fund respond to the BRICS initiative.