Brics reach concensus on $100bn bank

[yebocan]

Beijing - The five Brics nations have reached a broad consensus on their $100bn development bank though some differences remain, a senior Chinese diplomat said on Monday ahead of a summit in Brazil next week to be attended by President Xi Jinping.

The new bank will symbolise the growing influence of emerging economies in the global financial architecture long dominated by the United States and Europe through the International Monetary Fund and the World Bank.

Leaders of Brazil, Russia, India, China and South Africa are expected to sign a treaty to launch the bank officially when they meet at a Brics summit in the northern Brazilian city of Fortaleza on July 15.

Negotiations to create the lender have dragged on for two years, with some members growing weary of China's desire to have a bigger stake in the bank by putting in more capital.

A senior Brazilian government official said in May the five Brics nations were likely to agree to fund the bank equally, giving them the same rights.

Briefing reporters ahead of the summit, Chinese Vice Foreign Minister Li Baodong would not be drawn on the specifics of the share structure, but was optimistic.

"On the Brics development bank, all parties have extensive consensus on this issue. Of course there are a few differences and different viewpoints on technical issues," Li said.

"We are fully confident that we can reach consensus and establish the Brics development bank at this meeting," he added.

"On this type of technical issue, Brics members must establish consensus through friendly consultation," Li said, referring to the bank shares issue. "There are all kinds of different considerations, but the goal is to establish the Brics bank as soon as possible."

The bank will have to be ratified by the countries' legislatures and could begin lending in two years, the Brazilian official told Reuters earlier.

The new development bank would help cover growing demand for project financing that has not been entirely met by global multilaterals, which, for years, have been heavily criticised for meddling in the domestic policies of sovereign borrowers.

The Brics also need to decide if the bank will be based in New Delhi, Shanghai, Johannesburg or Moscow. Brazil will not offer headquarters because of upcoming presidential elections that could delay negotiations, the Brazilian official said.

Xi will also visit Argentina, Venezuela and Cuba on his swing through the region, and at the Brics summit will have his first meeting with new Indian Prime Minister Narendra Modi, Li said.

But he will not attend the final of the World Cup, as Brazil had hoped.

"Based on (his) schedule he will not be able to appear at the World Cup final held in Brazil. This is unfortunate," Li added.









http://www.fin24.com/Economy/World/Brics-reach-concensus-on-100bn-bank-20140707

 

[Scooby_Doo]

My vote for the HQ would be either Shanghai or Johannesburg. But as the most neutral, New Delhi or Johannesburg.

For the most stable locations? Moscow... nope, properly Shanghai?

 

[EtienneK]

Where are we going to get $20 billion to fund this?

 

[Ockie]

I realize Joburg is the economic heart of South Africa, and Africa, but I would say rather put the HQ in Cape Town if South Africa were to host it.

 

[zippy]

Probably borrow it from the world bank. lol

 

[sox63]

Where are we going to get $20 billion to fund this?

Debt most probably. Same as Brazi most probably. The rest I think can afford the buy in. But I sort of understand the equal contribution = equal influence rational.

 

[JStrike]

This will have a big impact on our economy. Good news

 

[JStrike]

Where are we going to get $20 billion to fund this?

$20 billion is fairly easy to raise

 

[Scooby_Doo]

lol, lets use debt to fund the buy in. Does anyone know of a bank that cater to 3rd work countries who would be able to lend amounts like that?

 

[JStrike]

lol, lets use debt to fund the buy in. Does anyone know of a bank that cater to 3rd work countries who would be able to lend amounts like that?

lol, you don't understand finance, yet you laugh at it. Lol at Apple and Verizon for issuing debt when they already have the cash in the bank.
3rd world countries no. South Africa on the other hand will raise that very easily

 

[JStrike]

I realize Joburg is the economic heart of South Africa, and Africa, but I would say rather put the HQ in Cape Town if South Africa were to host it.

That would have my support! But Shanghai is rumoured to be the likely host

 

[yebocan]

Brics set to launch development bank

Moscow - Leaders of the BRICS nations will launch their long-awaited development bank at a summit next week and decide whether the headquarters should be in Shanghai or New Delhi, Russian Finance Minister Anton Siluanov said on Wednesday.

The creation by Brazil, Russia, India, China and South Africa of a $100 billion bank to finance infrastructure projects has been slow in coming, with disagreements over its funding, management and headquarters.

“The (headquarters) issue will be decided on the level of the heads of the countries,” Siluanov told journalists, adding that the choice is between China's Shanghai and India's New Delhi.

BRICS leaders will meet July 15-16 in the Brazilian coastal city of Fortaleza.

The launch of the bank will be the group's first major achievement after struggling to take coordinated action following an exodus of capital from emerging markets last year, triggered by the scaling back of US monetary stimulus.

The new bank will symbolise the growing influence of the BRICS, something that Russia has hoped for after the West imposed sanctions on Moscow in the spring for annexing part of Ukraine and its continued involvement in the country's crisis.

Capitalisation of the new bank has been a major sticking point, but Siluanov confirmed that the funding would be divided equally, with an initial total of $10 billion in cash over seven years and $40 billion in guarantees.

The $50 billion will be eventually built up to $100 billion, and the bank will be able to start lending in 2016, he said.

The bank was first proposed in 2012.

The proposal was approved last year at a BRICS summit in South Africa but failed to be launched during the meeting in Russia last autumn of the Group of 20 developed and developing nations.

The bank will be open to other countries that are United Nations members, but the BRICS share is never to decline below 55 percent, Siluanov said.

The chairmanship, with a term of five years, will rotate among the members, but the first chairmanship is yet to be decided, Siluanov said.

FRAMEWORK AGREEMENT ON CURRENCY POOL

The heads of the BRICS will also sign a blueprint agreement on the group's other project - a $100 billion fund to steady the currency markets, which has also been off to a slow start.

The initiative became more acutely needed after an inflow of cheap dollars fuelled a boom in the BRICS for a decade and then reversed to a sharp outflow last year.

“We have reached an agreement that, in current conditions of capital volatility, it is important for our countries to have this buffer in addition to the International Monetary Fund,” Siluanov said.

But the framework agreement to be signed in Brazil will not include any direct commitments, which are due to come later when the central banks sign agreements.

A senior Brazilian official who participates in the negotiations said the pool could become operational as soon as in 2015.

According to the agreement, the cash will continue to be held in the reserves of each BRICS country, but it can be transferred if needed to another member to soften volatility in its foreign exchange market.

China, holder of the world's largest foreign exchange reserves, will contribute the bulk of the contingency currency pool, or $41 billion.

Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion.

“It is to be a mechanism that could react swiftly to capital outflow by offering swap operations .. in dollars,” Siluanov said.

If a need arises, China will be eligible to ask for half of its contribution, South Africa for double and the remaining countries the amount they put in.

“Some countries may put in less, but their needs are also greater, proportionally,” Siluanov said.

A BRICS member would be able to immediately get 30 percent of its eligible share and the remaining 70 percent only with a stabilisation programme from the IMF, Siluanov said. - Reuters




http://www.iol.co.za/business/inter...aunch-development-bank-1.1716778#.U70MsPmSx0Y