The Brics group of fast-growing nations is expected to discuss the creation of a common development bank for the grouping at a meeting in New Delhi next week.
Finance ministers from the Brics, which include Brazil, Russia, India, China and South Africa, raised the idea at a Group of 20 meeting in Mexico in late February, said a government official in Brazil. “It is still very much at the early stages of discussion,” he added.
The idea comes as the Brics nations are looking potentially to formalise their grouping by building common institutions and exploring opportunities for lending.
A disparate group of countries with sharply varying political systems and located at different corners of the globe, the Brics nonetheless share some common geopolitical, economic and trading interests. They are among the world’s largest economies and hold a large part of its foreign exchange reserves.
Among the other initiatives expected to be unveiled at the Brics meeting on March 28-29 is a plan by China to extend renminbi loans to other members of the grouping.
Its development bank is expected to sign a memorandum of understanding with its counterparts under which it will make renminbi loans available, while the other Brics nations’ development banks will also extend loans denominated in their respective currencies.
While the idea of a common development bank is still at the initial stages of discussion, its purpose would be better to mobilise savings between the countries.
However, China would probably be unwilling to support the idea unless it had control of the bank, Indian officials said. This would not rule out the proposal but would mean that Russia, Brazil and India would have to go it alone.
A common development bank could be an important tool for China, however, in its quest to promote the renminbi, which it is trying to build into an international currency that could one day rival the dollar or euro.
The plan to lend in renminbi is expected to increase trade between the five nations. Only 13 per cent of China’s trade in Asia is presently conducted in renminbi but this could rise to half by 2015, according to HSBC.
For Brics members such as Brazil, whose development bank has a balance sheet four times the size of the World Bank, a common institution for the grouping could provide a way of opening further trade links, particularly with Russia and China.
These are already big customers of Brazilian commodities but the Latin American economy is keen to persuade them to buy more manufactured products.
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