BRICS Want To Play By Own Rules – OpEd

By Konstantin Garibov

The recent summit of the BRICS countries (Brazil, Russia, India, China and South Africa) held in New Delhi earlier this week has fixed the intention of these five countries to play by their own rules on the international financial market.

The BRICS criticized the slow pace of the IMF quota and governance reform and made clear that they want more voting rights in the IMF.The BRICS have sent a strong signal to the West that they will no longer put up with a situation when agreements on redistributing voting power in favor of the emerging fast-developing markets whose share in the global economy is rapidly increasing, are actually being ignored.

The agreement on redistributing voting power was achieved as early as two years ago first on the level of G20 and than on the level of the IMF. Since then the US and the EU found themselves in unprecedented deep debt hole while the role of BRIC countries in the global economy has been growing steadily. In particular, China has become the world’s second largest economy stealing a competitive advantage of the British, French, German economies.

The BRICS accused the rich nations of irresponsible policies that destabilized the world economy and provoked a global financial crisis. They criticized the monetary policy of the United States that gives the rich West unilateral advantages, while impeding the development of the rest of the world. The BRICS took a major step forward towards a multi-polar currency system. The financial institutions in BRICS countries signed an agreement on the mutual lending in the national currencies of the BRICS members. By reducing the share of the dollar in their mutual payments, the BRICS are hoping to avoid the impact of sharp dollar fluctuations on international stock markets. In addition, mutual contracts denominated in national currencies will be cheaper for the parties involved. We hear from Vladimir Rozhankovsky, the head of the analytical department of the Nord Kapital company.

“Conversion of one national currency into dollar and than into the currency of this country’s trade partner is redundant. When trade turnover between two countries reaches a certain level it is much more convenient for them to perform their mutual payments in their national currencies. This also reduces currency risks. By the way the currencies of BRICS countries are quite steady. At least they can compete with dollar more successfully than euro. The stability of BRICS’ currencies is growing and extra conversion only cuts part of the profit.”

To give their financial cooperation a solid footing, the BRICS decided to set up their own Development Bank. The Delhi Declaration says that the new bank will mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies. We hear from financial analyst Natalya Smirnova.

“The World Bank and the IMF were created under the hegemony of the developed countries. The projects they choose to support are usually beneficial for the US and Europe. This also applies to the projects of BRICS. Other projects, which may be controversial for the US and Europe, do not receive any financial support. Probably, this is why BRICS have decided to set up their own Development Bank to finance their projects regardless of the opinion of the US and Europe. BRICS countries have funds unlike Europe or the US, which has been living on debt. BRICS countries really have projects the US and Europe may find disadvantageous for themselves.”

In general, the summit in New Delhi has fixed more decisive approach of BRICS to the reform of the international financial system. It reflects the growing political voice of the five rapidly developing nations in the world and their stronger position in the global economy.