DURBAN, South Africa — The leaders of Brazil, Russia, India, China and South Africa have agreed to form a new development bank that will fund infrastructure projects and development in emerging markets.
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The five countries, known as the BRICS group of nations, contain more than 40 percent of the global population and conduct 17 percent of world trade, BBC News reported.
The bank is intended to fund development and infrastructure projects in BRICS nations and elsewhere. First discussed a year ago, it has been described as an alternative to the IMF and World Bank for developing countries.
Although the plan is the biggest announcement to come out of a summit of BRICS leaders in Durban, South Africa, where they signed an accord today, details such as how much capital the bank will have, its structure and its location have yet to be worked out.
South Africa’s Finance Minister Pravin Gordhan said some countries “had mentioned $50 billion” as a capital target, but there were “different views” on how much money the bank should have, the Financial Times reported.
A joint statement by BRICS leaders today said only that “the initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure.”
Although there was no announcement on where the bank will be based, South Africa made it clear it would like to play host.
One South African official told the paper it would take at least a year to agree on the institution's structure.
The group also agreed to establish a $100 billion foreign currency crisis fund for its members, the FT reported.
“Up until now, it has been a loose arrangement of five countries meeting once a year,” Abdullah Verachia, director of the Frontier Advisory Group, told the New York Times. “It is going to be the first real institution we have seen.”
However, countries in the group haven't been particularly supportive of one another in the past, the New York Times noted. They spend just 2.5 percent of their foreign investment budgets in other BRICS countries, and China and South Africa compete for mining, manufacturing and telecommunications business in Africa.
"Russia calls for using the economic potential of BRICS more effectively, with the backing of business for increasing the volumes of mutual trade, investment and broadening industrial and technological co-operation,” Russian President Vladimir Putin said before the meeting, BBC News reported. “Certainly, the creation of a BRICS development bank [would support] this."
However, Putin's spokesman Dmitri Peskov told reporters there are still “a lot of nuances” to be discussed at the next summit. “All the talk now is about creating the bank in general terms."