MercoPress. South Atlantic News Agency

BRICS summit decides ‘formal negotiations’ to create a development bank

Host President Zuma (Center) host of the summit next to the other BRICS leaders

The leaders of the five BRICS nations stopped short of establishing a highly-promoted development bank at this week’s summit in South Africa, instead saying they would enter “formal negotiations” on the issue. But the summit did yield some agreements, including big-money bilateral trade deals.

The main objective of this year’s BRICS summit was to be the establishment of a development bank. South Africa’s finance minister said the negotiations were “done” the night before the summit -- but that was clearly not the case.

South African President Jacob Zuma said Wednesday morning that the five nations -- Brazil, Russia, India, China and South Africa -- would enter “formal negotiations” to establish the bank.

That moves the issue slightly forward, but still does not address where the bank will be, or how much money each nation will contribute. Several experts and officials have said the bank will start with 50 billion dollars, divided equally.

“Following the report from our Finance Ministers, we are satisfied that the establishment of a New Development Bank is feasible and viable. We have agreed to establish the New Development Bank,“ said Zuma. ”The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure.”

South African Finance Minister Pravin Gordhan told journalists that the lack of agreement on details was not a failure. “The fact that in one year, you can initiate an idea and bring it to the point where you have five different countries saying, ‘we agree, let’s establish it,” and having established its feasibility and viability, I think is phenomenal progress,” he stated.

He acknowledged, however, that the leaders have not agreed where the bank will be. His choice? South Africa, of course, he said with a smile.

A joint statement by BRICS leaders said that “the initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure.”

But the group also agreed to establish a 100 billion dollars foreign currency crisis fund for its members, the FT reported.

The summit also yielded some more concrete deals, including a sheaf of agreements between South Africa and Russia and a multibillion dollar bilateral deal between South Africa and China to build ships in the port city of Durban.

The five countries contain more than 40% of the global population, have 4.4 trillion dollars in reserves and conduct 17% of world trade. In 2002 trade between the group members was 27bn; last year stood at 282bn and for 2015 is forecasted to reach 500bn.

BRICS members are seeking greater sway in global finance to match their rising economic power. They have called for an overhaul of voting rights and management of the World Bank and IMF, which were created in Bretton Woods, New Hampshire, in 1944, and oppose the practice of their respective presidents being drawn from the US and Europe.

For South Africa, which makes up just 2.5% of total GDP in BRICS, the summit is a way to showcase its role as an investment gateway to Africa. President Jacob Zuma invited 15 African heads of state, including Egypt’s Mohamed Mursi and Ethiopia’s Hailemariam Desalegn, for talks with the BRICS leaders at the summit.

For most of the BRICS leaders, it was also the first opportunity to meet Chinese President Xi Jinping after his appointment on March 17.

The nations will hold their next summit in Brazil.