Brazilian President Dilma Rousseff, Chinese President Xi Jinping
and South African President
Jacob Zuma smile at a group
Leaders of the BRICS emerging market nations
launched a $100 billion development bank and a currency reserve pool on
Tuesday in their first concrete step toward reshaping the Western-dominated
international financial system.
The new bank reflects the growing influence of the BRICS, which account for almost half the world's population and about one-fifth of global economic output.
The bank will begin with a subscribed capital of $50 billion divided equally between its five founders, with an initial total of $10 billion in cash put in over seven years and $40 billion in guarantees.
It is scheduled to start lending in 2016 and be open to membership by other countries, but the capital share of the BRICS cannot drop below 55 percent. The contingency currency pool will be held in the reserves of each BRICS country and can be shifted to another member to cushion balance-of-payments difficulties.
This initiative gathered momentum after the reverse in the flows of cheap dollars that fueled a boom in emerging markets for a decade.
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. 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.
Negotiations over the headquarters and first presidency were reached at the eleventh hour due to differences between India and China.
The impasse reflected the trouble Brazil, Russia, India, China and South Africa have had in reconciling stark economic and political differences that made it hard for the group to turn rhetoric into concrete action.
Negotiations to create the bank dragged on for
more than two years as Brazil and India fought China's attempts to get a
bigger share in the lender than the others.
China, however, will not preside over the bank
for two decades.