"Leaders of the BRICS nations meeting in India appear to have made much
progress in creating a new global bank as the emerging economies seek to convert
their growing economic might into collective diplomatic influence.
The five countries now account for nearly 28% of the global economy, a figure
that is expected to continue to grow.
On Thursday morning, President Hu Jintao of China, President Dmitry Medvedev
of Russia , President Dilma Rousseff of Brazil, President Jacob Zuma of South
Africa and Prime Minister Manmohan Singh of India shook hands at the start of
the one day meeting in New Delhi.
Top of the agenda was the creation of the grouping's first institution, a
so-called "BRICS Bank" that would fund development projects and infrastructure
in developing nations.
The initiative would allow the countries to pool resources for infrastructure
improvements, and could also be used in the longer term as a vehicle for lending
during global financial crises such as the one in Europe, officials said.
Less noticed and commented upon is the aspirations of the BRIC nations to
become less dependent on the global reserve currency, the dollar and to position
their own currencies as internationally traded currencies.
The leaders of BRIC nations and other emerging market nations have adopted
the idea of conducting trade between the five nations in their own currencies.
Two agreements, signed among the development banks of Brazil, Russia, India,
China and South Africa, say that local currency loans will be made available for
trade between these countries.
The five fast growing nations participating in local currency trade will
allow participants to diversify their foreign exchange reserves, hedging against
the growing risk of a euro or dollar crisis.
The BRICS want to have easy convertibility of currency to make it easier to
use the real, ruble, rupee, renminbi and rand amongst themselves without having
to always use the US dollar. Higher intra-Brics trade, conducted in their own
currencies would shield their economies from economic dislocations in the
west.
In the long run, if global dependence and exposure to the dollar is to be
reduced, then the BRICs currencies will have to trade amongst themselves,
creating an intra Brics currency market. This could lead to a special reserve
BRICs currency that could rival the IMF's Special Drawing Rights (SDRs) and in
time a regional currency could emerge. However, the EU's experience of a single
currency may make this less likely..."
at http://www.zerohedge.com/news/brics-bank-rival-world-bank-and-imf-and-challenge-dollar-dominance
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