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BRICS summit in Brazil: A blow to IMF and World Bank

6th BRICS SummitBy Edmond Rivero

Special to CSMS Magazine

The leaders of the BRICS nations met in the Brazilian city of Fortaleza this week for a summit out of which, its results could only send chill in Washington and in Europe. The leaders of Brazil, Russia, India, China and South Africa signed an agreement to officially create a bailout and development fund worth $100 billion and a reserve currency pool worth over another US$100 billion. This constitutes the biggest challenge yet to the sagging western economies that have become increasingly dependent on the emerging financial powers to stay afloat. Mario Lushinky, an Argentine’s economist, confirmed this assertion in the wake of the signing.  

The fund is tentatively called the New Development Bank — and other countries may later join it. The BRICS Development Bank will be headquartered in Shanghai.

Also in the official release, documents on cooperation between BRICS export credit agencies and an agreement of cooperation on innovation were also signed. “We remain disappointed and seriously concerned with the current non-implementation of the 2010 IMF (International Monetary Fund) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness,” the group declared in a press release which was interpreted as a direct rival to both IMF and World Band. The leaders also agreed that the bank’s first president will be from India.

Russian President Vladimir Putin did not hide his joy after the agreement. And he added that the summit “sought to decouple dependency on the U.S. dollar and strengthen the rule of international law.” The BRICS nations have shown the world that they put their common interests into a strategic platform foregrounded on a shared desire to reform the international monetary and financial system. “In the present form it is unjust to the BRICS countries and to new economies in general. We should take a more active part in the IMF and the World Bank’s decision-making system. The international monetary system itself depends a lot on the US dollar, or, to be precise, on the monetary and financial policy of the US authorities. The BRICS countries want to change this,” said economist Lushinky.

The rest of the South America was represented in the summit by their head of states, including reactionary Colombia.

The next year’s BRICS Summit will be held in the Russian city of Ufa after the grouping’s successful meeting in Brazil that saw an agreement being reached on establishing a development bank and a contingency reserve arrangement. “Brazil, India, China and South Africa convey their appreciation to Russia for its offer to host the Seventh BRICS Summit in 2015 in the city of Ufa and extend their full support to that end,” the BRICS leaders said in the Fortaleza Declaration. Ufa is the capital city of the Republic of Bashkortostan, Russia, and the industrial, economic, scientific and cultural center of the republic.

Note: Edmond Rivero is a new contributor to CSMS Magazine. He lives and works in Boulder, Colorado. He wrote this piece exclusively for CSMS Magazine.

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