As Brazilians were recovering last week from the World Cup, the country held another global event: the BRICS summit, a gathering of leaders from Brazil, Russia, India, China, and South Africa. The outcome was no doubt more pleasing to Brazil’s President Dilma Rousseff than her country’s soccer performance. The countries agreed to set up a $50 billion “BRICS bank” to invest in development projects in the developing world, alongside a $100 billion pool of reserve currencies earmarked as “a kind of mini-IMF,” according to Russian Finance Minister Anton Siluanov. It was a strong statement of the grouping’s growing global economic heft and a challenge to the order established by the International Monetary Fund and the World Bank.
Some in the West have perceived that challenge as a threat. The U.S. has veto power over major decisions at the International Monetary Fund. Without European or American backing, it is almost impossible to get a loan through the World Bank. The North Atlantic powers will have no such say in the operations of the BRICS bank, another sign that the global balance of economic and financial power is shifting.
The BRICS do pose a threat, but their own development bank isn’t it. The more worrisome risk is that the BRICS won’t grow as quickly as they have in the past, that the grand plans hatched in Brazil will dwindle along with the economies supporting them. If pessimistic forecasts of Asian and Latin American economic performance turn out to be justified, that’s no reason for cheer in Washington or Brussels—collapsing growth in the developing world would be terrible news for the West.
via BRICS Summit: A Show of Economic Might Is Nothing to Fear – Businessweek.
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