With underdevelopment and currency volatility in the emerging markets, the biggest players have set out to fix those problems. The BRICS leaders met in late March in South Africa to plan out objectives for a new bank that would help fund infrastructure expansion, which is set to reach $4.5 trillion in the next five years. Talks also included discussing pooling foreign currency reserves to resolve currency volatility.
The BRICS term was coined back in 2001, so the trading block is still relatively new in the larger picture. However, more people are backing the idea of a shift of power from the established economies of the northern hemisphere, to the emerging economies of the southern hemisphere.
The BRICS are seeking greater influence on global financial matters to match their rising economic power. Right now, the World Bank is mostly dominated by western powers – United States and most of Europe. The BRICS want a better representation at the bargaining table and that is why they’re attempting to create a new bank. After all, they hold 43% of the world’s population and $4.4 trillion of combined foreign currency reserves.
The BRICS agreed to a bank in principal at the summit in late March 2013, but much of the details are still to be worked out. The finalization process could take a while. Details that need to be worked out include where to locate the bank, how much each country needs to put into the bank and how the bank will distribute funds. Russia favored capping initial contributions at $10 billion dollars but others suggested $50 billion – quite a large gap.
If the BRICS come together and follow through on this plan, it symbolizes that they can achieve something as a unified group. This could lead to many more partnerships along the way as well and aid in further development of the emerging economies.