BRICS Development Bank…Sure Why Not?

The G20 Finance Ministers meeting to take place this weekend in Mexico City comes at a time where Europe has begun to reduce their crisis, the US and its President is singing along with better economic numbers and BRICS nations continue to roll on despite slower growth in Brazil and inflationary issues in China. What Indian ministers are hinting at and what might be an appropriate venue in Mexico is that the BRICS should establish their own development bank in order to fund projects in developing nations and bypass restrictions and political pressures from banks traditionally funded by the US and Europeans.

With the BRICS making up the largest block of nations having the best growth rates over the last few years, it makes some sense to create a bank that can be funded by these nations. Despite it being a basic idea at the moment, the BRICS.D.B. would help them and other BRICS candidates like Mexico and Turkey and anyone else who qualifies for funding. While development banks already exist in the regions where BRICS operate, their links to the US and Europe when those regions are in economic distress might make a strong point for a BRICS.D.B. To separate the BRICS funding from the US and Europe might be difficult. Currently China and Europe are discussing funding assistance from China to the EU, building ties between the two interdependent regions. It is questionable whether BRICS nations have enough in common to sustain a development bank or any common policy. The reality is that Brazil and India, China and Russia, and South Africa have different goals, different people, different policies and differing interests that often oppose each other or have very little in common. Brazil supported the idea of the BRICS.D.B. suggested by India, but with a number of failed associations in the Americas that Brazil had been supporting, it is hard to say whether or not economic growth in a set of collected and labelled nations is enough to share a development bank to fund other nations that have no ties to the BRICS. Perhaps the inclusion of at least one BRICS official with sympathy towards the BRICS would sink the idea of a BRICS.D.B. This could be a move to ensure this will happen.

Robert Zoellick, an American and current head of the World Bank announced he will step down this June from his position. The appointment of Christine Lagarde French national at the IMF over her rival Mexican Central Bank Governor Agustin Carstens last year re-confirmed the tradition of a European as the head of the IMF and an American as the head of World Bank. The current candidacy of the World Bank might woo Mr. Carstens if a push by BRICS nations to separate themselves from the current system encourages a head that straddles US interests and BRICS interests. Carstens has lead Mexico through the 2008 economic crisis and reduced trade with the US and drug violence in Mexico to give America’s NAFTA partner one of the largest reserves in Mexico’s history. As a possible future BRICS and close American ally, this move by India and Brazil’s support may not produce a BRICS.D.B, but it could help pro-BRICS interests into one of the top positions in the World Bank. Certainly a clever move by the BRICS if this is the case. Good luck Agustin?