News Release

BRICS Development Bank: Alternative to “Washington Consensus”

AP reports: “The leaders of five emerging market powers said at a summit Tuesday that they gave final agreement to creating their own development bank worth $100 billion that will have its headquarters in China.

“The first president of the New Development Bank will be from India and the position will rotate every five years among Brazil, Russia, India, China and South Africa — the so-called BRICS nations, a joint statement from the leaders said.”

SAMEER DOSSANI, [in Brazil], sameer.dossani at gmail.com, @sameerdossani
Dossani is with ActionAid International, an international federation of more than 45 countries working to end global poverty. He recently contributed the piece “BRICS Bank: New Bottle, How’s the Wine?” to the BRICS Summit Reader published by the Heinrich Boell Foundation [PDF]. He writes, “The World Bank and its sister institution the International Monetary Fund, established 70 years ago, have lent billions to developing countries. Yet in their heyday — in the 1980s and 1990s — these institutions did not produce results in terms of poverty reduction or even in terms of increasing economic growth. In almost all regions, inequality skyrocketed during this period. Even now, with the exception of Latin America, the gap between rich and poor continues to grow.

“Part of the failure can be attributed to the triumph of ideology over evidence. ‘Washington consensus’ policies — fiscal and trade liberalisation, privatisation and budget austerity — were required of every developing country that sought international assistance. The results have not been pretty. As has been extensively documented, the period from 1980-2010 was in part defined by extremely slow growth globally. Where growth did occur in the North, it often turned out to be the result of speculative bubbles. In the South, the only countries to grow were those that ignored Washington consensus policies – China, Malaysia, Singapore and a few others — and used state-backed borrowing and investment to drive an industrial policy. …

“In addition to a more democratic governance structure — we are hearing rumours that each of the BRICS countries will contribute an equal share of money to the New Development Bank pot, meaning that they would all have the same number of votes on its board — the NDB should ensure that representatives from recipient countries are also part of the process. … If the NDB can establish governance structures more equitable, more transparent, and more tilted towards ensuring that the needs of poor countries are at the fore, it may add to the already building pressure for meaningful reform of the Bretton Woods institutions.

PEPE ESCOBAR, [in Brazil], pepeusa at mac.com
Escobar’s books include Obama Does Globalistan. His piece, “BRICS Against Washington Consensus,” was printed yesterday in Asia Times. He writes, “The BRICS Development Bank — with an initial US$50 billion in capital — will be not only BRICS-oriented, but invest in infrastructure projects and sustainable development on a global scale. The model is the Brazilian Development Bank (BNDES), which supports Brazilian companies investing across Latin America. In a few years, it will reach a financing capacity of up to $350 billion. With extra funding especially from Beijing and Moscow, the new institution could leave the World Bank in the dust. Compare access to real capital savings to U.S. government’s printed green paper with no collateral.

“And then there’s the agreement establishing a $100 billion pool of reserve currencies — the Contingent Reserve Arrangement (CRA), described by Russian Finance Minister Anton Siluanov as ‘a kind of mini-IMF.’ That’s a non-Washington consensus mechanism to counterpunch capital flight. …

“It’s always instructive to come back to Argentina. Argentina is imprisoned by a chronic foreign debt crisis essentially unleashed by the IMF over 40 years ago — and now perpetuated by vulture funds. The BRICS bank and the reserve pool as an alternative to the IMF and World Bank offer the possibility for dozens of other nations to escape the Argentine plight. Not to mention the possibility that other emerging nations such as Indonesia, Malaysia, Iran and Turkey may soon contribute to both institutions.”