Watch Out, World Bank: Here Comes the BRICS Bank
Leaders of the five BRICS nations plan to create a development bank in a direct challenge to the World Bank that they accuse of Western bias.
The bank would use $50 billion of seed capital shared equally between Brazil, Russia, India, China and South Africa but would undoubtedly be dominated by China. It would be the first institution of the informal forum started in 2009 amid the economic meltdown to chart a new and more equitable world economic order.
At a summit meeting on Wednesday in Durban, South Africa, Russian President Vladimir Putin gave support for the bank but cautioned it "must work on market principles."
India's trade minister said BRICS will "have a defining influence on the global order of this century."
The five countries represent a fifth of global GDP and share high growth and geopolitical importance in their separate regions, but have struggled to find common ground that would convert their economic weight into joint political clout.
The two biggest economies of the group, China and Brazil, marked their determination to make changes in the world's trade and financial architecture by signing a three-year currency swap agreement covering up to $30 billion a year in bilateral trade.
Brazilian officials said the aim was to ensure their fast-growing commercial ties would not suffer if a new banking crisis caused dollar trade finance to dry up.
"Our interest is not to establish new relations with China, but to expand relations to be used in the case of turbulence in financial markets," Brazilian Central Bank Governor Alexandre Tombini told reporters after the signing.
Brazil's mineral resources and farm products have helped fuel China's industrial growth and feed its people while bringing prosperity to the Latin American giant.
Bilateral trade totaled around $75 billion last year, with Brazil selling iron ore, soy products and crude oil, and buying Chinese machinery, electronics and manufactured goods.
Brazilian officials have said they hope to have the trade and currency deal operating in the second half of 2013.
"If there were shocks to the global financial market, with credit running short, we'd have credit from our biggest international partner, so there would be no interruption of trade," said Economy Minister Guido Mantega.
At the Durban summit, the group's fifth since 2009, the BRICS leaders were also expected to endorse plans to create a joint foreign exchange reserves pool.
The proposed development bank and reserves pool reflect frustration among emerging nations at having to rely on the World Bank and International Monetary Fund, which some see as reflecting the interests of rich nations.
The reserves pool of central bank money would be available to emerging economies facing balance of payments difficulties or could be tapped to stabilize economies during crises, according to documents obtained by Reuters outlining it.
Officials had said BRICS states aimed to inject an initial $50 billion into a new infrastructure bank, but there was disagreement over whether each should contribute $10 billion or if contributions should vary by the size of their economies.
The bank would support financing needs in emerging and developing nations for roads, ports, power and rail services.
The BRICS leaders were also due to discuss economic ties with Africa, at a time when many on the continent are seeking more balance and a different focus in trade and investment, especially from China. (Read More: China's New President Offers Africa 'No Strings' Aid)
New Chinese President Xi Jinping is attending on his first visit as head of state to Africa. In Tanzania on Monday, Xi told Africans he wanted a relationship of equals that would help the continent develop, responding to concerns that Beijing is only interested in its raw materials.