Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.
Was the fifth summit of BRICS leaders (Brazil, Russia, India, China and South Africa) held in South Africa on 27 March a success? At least all the leaders attended. In fact, the BRICS summits have a perfect attendance record. By contrast, the G20 lost its perfect attendance record at its fourth summit when the Australian and Brazilian leaders did not attend.
The BRICS leaders agreed to meet again next year in Brazil. And there will be many BRICS meetings before the next summit. The eThekwini Action Plan refers to 18 meetings of ministers and officials from the BRICS before the next summit. A BRICS business council and think tank were also launched. On this score it is ahead of the G20.
When Jim O’Neil coined the acronym BRIC in 2001, little did he know he was launching what would become an increasingly structured forum of meetings that started with the first BRIC summit in 2009. South Africa joined and added the 'S' in 2010.
Questions have been raised over the significance of the BRICS grouping and whether it will last. Perfect attendance aside, there has been little substantive output. The most significant initiative was from the Indian Prime Minister at the Delhi summit in 2012 with a proposal for a BRICS development bank. BRICS finance ministers were instructed to examine the feasibility of the idea and there were high expectations that the 2013 summit would announce a decision on the bank. [fold]
BRICS leaders did not agree on the funding or structure of the bank, although their statement says it is 'feasible and viable' and would be established with sufficient capital to be effective in financing infrastructure. However the Russian assessment was that 'there is positive movement, but there is no decision on the creation of the bank'.
The BRICS did agree on pooling $100 billion of reserves aimed at providing 'mutual support and further strengthening financial stability'. Details have not been provided, but the Brazilian Finance Minister said it would be modeled on the Chiang Mai initiative.
So there has been some progress. But settling the detail of the BRICS bank will be difficult. Decisions are required on the size of the capital base and whether contributions and influence will be equal. China dominates the BRICS; its economy is four times as large as Russia's or India's and about 20 times the size of South Africa's. Given China's claims that shareholdings in the international financial institutions should reflect countries' relative weight in the global economy, an equal shareholding structure for the new BRICS bank would appear odd. And equal capital contributions would constrain the bank if it is to grow. But would the others be happy to see China dominate the bank?
Other points of detail include who staffs the bank, its head and the location of its headquarters. But perhaps the most contentious issue is where the bank will lend. Here the differences between the BRICS may come to the fore. India's focus is likely to be to use the bank to bridge its domestic infrastructure deficit. South Africa also has large development needs. Brazil is more likely to want to support its overseas trade and investment. China does not need assistance in funding its domestic investments, although may be interested in the bank taking the risk of some of China's investments in resource-rich developing countries.
The terms and conditions around loans will have to be settled. The main rationale for the new bank has been described as a way to bypass the World Bank and the IMF. It would be unfortunate if the bank was seen as an alternative to the World Bank simply because it offered lighter conditions. Rather than being pitched as a rival, it would be preferable if the bank was presented as complementing the World Bank.
A driving force behind the BRICS movement is frustration with the IMF, yet if the reserves pool is modeled on Chiang Mai, drawings above a certain limit will require an IMF program and there will be efforts towards regional surveillance. It is hard to see this approach gaining traction among the BRICS.
So did the fifth summit breathe further life into a grouping of countries where differences appear to outweigh what they have in common? To a point. It was not a 'game changer', and the differences between the members will become more apparent as they attempt to settle the detail of the new initiatives. But there is some momentum.
Photo by Flickr user GovernmentZA.