The Brics countries – Brazil, Russia, India, India, China, and South Africa – will formally set up their New Development Bank (NDB) and a Contingent Reserve Arrangement (CRA) on July 9 in Ufa in Russia.
What do these arrangements really mean other than dissatisfaction with the old world order?
And the fact that once, these five countries, shared something: that they were all growing strongly a decade ago.
Here’s what the Brics bank and the CRA do not mean:
– the de-dollarisation of the world
– a body blow to the International Monetary Fund
– the share of the dollar in global foreign-exchange reserves remains more than 60 per cent and 85 per cent of global foreign-exchange transactions involve dollars
– credit swaps of more than 30 per cent between the Brics countries requires them to negotiate a program with the IMF
If you don’t believe me, read Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley. He’s very sympathetic to the Brics’ dissatisfaction with the way things are, he just doesn’t think these will make much difference.
So what is the point of the new systems being created? They are a good marker of intent and a reasonable way to underline the ridiculousness of the anachronistic way of doing business in the Bretton Woods institutions.
But they don’t mean a huge tectonic shift.