Leaders of the biggest emerging markets agreed on steps to increase lending in local currencies to foster trade, while calling on Western nations to give them more sway in global finance.
The BRICS economies of Brazil, Russia, India, China and South Africa signed an accord to boost credit for trade transactions, according to a joint declaration issued after their summit in New Delhi today. The countries also authorized a study into the feasibility of establishing a multilateral bank for funding projects in the developing world.
“The agreement signed today by development banks of BRICS countries will boost trade among us by offering credit in our local currencies,” Indian Prime Minister Manmohan Singh said at the summit. “A suggestion has been made to set up a BRICS development bank. We have directed our finance ministers to examine the proposal and report back at the next summit.”
The initiatives come as the BRICS group, which accounts for more than 40 percent of the world’s population, seeks greater influence in bodies such as the World Bank to match its rising economic heft. The bloc today called on advanced nations to avoid creating “excessive global liquidity” that hurts emerging markets by stoking swings in capital flows and commodity prices.
‘Work in Progress’
“The signature initiatives of more use of local currencies and a new development bank are very much work in progress,” said Madan Sabnavis, chief economist at Mumbai-based Credit Analysis & Research Ltd. “The vision of BRICS as a powerful bloc acting cooperatively with a single voice remains more hope than reality. These countries are too different for that.”
The accord on local-currency lending aims to reduce demand for “fully convertible currencies” for trade and cut transaction costs, the Indian government said.
The BRICS group said it accounted for 15 percent of global trade in 2010, up from 3.6 percent in 1990, and that its share of world gross domestic product rose to almost 25 percent in 2010 from 16 percent in 2000 in purchasing power parity terms, which adjusts for exchange rates.
The study into the BRICS bank builds on a pledge leaders from the five nations made at their meeting in April 2011 in China, when they promised to “strengthen financial cooperation among the BRICS Development Banks.”
Efforts by the emerging world to end the practice of naming World Bank presidents from the U.S. and the head of the International Monetary Fund from Europe have so far failed. The positions should be filled on merit, the BRICS leaders said in today’s declaration, adding the World Bank should give greater priority for meeting development-finance needs.
China’s President Hu Jintao said at the summit that BRICS nations should enhance coordination at the Group of 20 and the United Nations. The world recovery faces challenges, he said.
The summit declaration flagged risks to the global recovery from swings in oil and food prices and Europe’s debt crisis.
The leaders met following a jump of about 28 percent in the price of crude in the past six months, partly on concern that international tensions with Iran may disrupt supplies.
The situation there can’t “be allowed to escalate into conflict,” they said in the communique. The leaders also called for “an immediate end to all violence and violations of human rights” in Syria, where the UN estimates more than 8,000 people have been killed since unrest began a year ago.
Singh hosted Hu, Russian President Dmitry Medvedev, Brazil’s President Dilma Rousseff and South African President Jacob Zuma at the fourth BRICS summit. South Africa has attended since 2011. The term BRIC was coined by Goldman Sachs Asset Management Chairman Jim O’Neill a decade ago to refer to major emerging markets with growth potential.
To contact the reporters on this story: Unni Krishnan in New Delhi at firstname.lastname@example.org; Ilya Arkhipov in New Delhi at email@example.com
To contact the editor responsible for this story: Stephanie Phang at firstname.lastname@example.org