"We have not the least interest in distancing ourselves from the IMF," she said. Some of their financing would be available only to countries already receiving Fund assistance.ĭilma Rousseff, the president of Brazil, said the creation of the BRICS institutions did not mean her country was moving away from the IMF. Some also have concerns that the BRICS institutions dominated by China will be less careful about safeguarding the environment or fighting corruption when they make their financing deals.Īware of their current limitations, the BRICS made a point to say they were working closely with the IMF. "Will the BRICS take the financial risk to lend to other countries? And what conditions will they impose?" said an IMF official, who spoke on condition of anonymity.Īccustomed to bailing out a country, and being reimbursed, in exchange for austerity conditions, the IMF has the kind of expertise that "doesn't happen overnight," the official said. However, proof of the new institutions' effectiveness will come when other countries knock at their door for money. Still, many areas of uncertainty cloud the new BRICS structures, giving the IMF and the World Bank a long lead on their fledgling rivals.įor now, only the BRICS countries will be able to draw from the $50 billion in the New Development Bank and $100 billion in the Contingent Reserve Arrangement. The launches "are significant actions that represent a game changer as they turn statements and rhetoric about cooperation among these countries into reality," Prasad said. The mere creation of the two BRICS institutions sends a strong signal to Western powers, where some doubt the ability of the five powerhouses to surmount their individual needs and ambitions. "If the existing institutions were doing their jobs perfectly, there would be no need to go to the trouble of creating a new bank, a new fund," said Paulo Nogueira Batista, who represents Brazil and 10 other countries at the IMF, in an interview. In this context, the launch Tuesday of a development bank and an emergency reserve fund by the BRICS Brazil, Russia, India, China and South Africa appears to be a concrete attempt to address those inequities. "Broader global governance reforms have become stalled, despite the many commitments made by advanced economies to emerging markets to give them a more prominent role in international financial institutions and other international forums," said Eswar Prasad, a trade policy professor at Cornell University and a former IMF expert. And, since their creation in 1944, the IMF and the World Bank have only been led by Americans and Europeans. WASHINGTON, July 20: By creating their own multilateral financial institutions, the BRICS emerging-market powers are shaking up global economic governance but remain far from dismantling the post-war system dominated by the West.įor the past 70 years, the International Monetary Fund and the World Bank have been the pillars of the world's economic system, coming to the rescue of countries in trouble and supporting development projects, respectively.īut the Bretton Woods institutions are regularly criticized for their inability to reflect the growing and important contributions of the major emerging economies to the global economy.Ĭhina, the world's second-largest economy, continues to have just slightly more voting power in the IMF than Italy, about five times smaller.
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