Fresh from the World Cup final, Brazilian President Dilma Rousseff hosts the leaders of Russia, India, China and South Africa in Fortaleza on Tuesday before an unprecedented meeting with South American leaders the next day in Brasilia.
On the diplomatic front, the summit will mark the first face-to-face meeting between India’s new Hindu nationalist Prime Minister Narendra Modi with Chinese President Xi Jiping.
|Brazilian President Dilma Rousseff. (Bloomberg)|
For Russian President Vladimir Putin, who traveled to Cuba last week, the trip comes amid newly frayed relations with the West over the crisis in Ukraine.
The leaders, including South African President Jacob Zuma, will establish two new financial organizations: a development bank to fund infrastructure projects and a reserve fund to fend off currency and balance of payments crisis.
The BRICS are “countries with enormous potential that can gain many benefits for themselves but also for a new economic and international political order,” said senior Brazilian foreign ministry official Jose Alfredo Graca Lima.
Graca Lima said the bank and the reserve would “complement” the Washington-based World Bank and International Monetary Fund.
The bank will have capital of $50 billion with each country contributing $10 billion, while the reserve, which has been described as a “mini-IMF,” will have $100 billion at its disposal, Graca Lima told reporters.
For the fund, China will make the biggest contribution, $41 billion, followed by $18 billion from Brazil, India and Russia and $5 billion from South Africa.
“The BRICS want to create alternatives, a type of global monetary policy more in tune with the realities of emerging countries,” Andre Perfeito, chief economist at Gradual Investimentos consultancy, told AFP.
Despite their agreement on the need for a bank, the five countries are split on where it should be headquartered.
Graca Lima said Shanghai was the frontrunner to host the bank but South Africa’s Trade and Industry Minister Rob Davies said Johannesburg was still in the running. New Delhi and Moscow are the other candidates.
The five nations are also negotiating who should hold the bank’s rotating presidency first. And the membership of the board of directors has yet to be decided.
The BRICS were created after economist Jim O’Neill used the acronym in 2001 to describe the growing powers. They are now seeking to break the European, U.S. and Japanese domination of financial institutions.
“The BRICS unite a group of nations with different, even opposed, interests,” said Oliver Stuenkel, author of “BRICS and the Future of Global Order” and professor at the Getulio Vargas Foundation.
But they have given developing nations the ability to use a “platform” strong enough to challenge world order, he said.
The talks in Fortaleza will open a series of marathon summits and bilateral meetings that will bring the BRICS group to Latin America.
After the BRICS meet with South American presidents in Brasilia on Wednesday, Xi will launch the China-Latin America forum, highlighting Beijing’s growing interests in a region historically tied economically to the United States.
Xi will then travel to Argentina, Venezuela and Cuba.
Before the summit, Putin will be in Rio de Janeiro on Sunday to attend the World Cup’s Argentina-Germany final at the Maracana Stadium. Russia is hosting the next tournament in 2018.
There, Putin will hold talks with German Chancellor Angela Merkel.
The summits come as the economies of some BRICS countries, which together represent 18 percent of the world economy, are cooling down. Russia and Brazil are expected to see growth of just one percent this year.
“They may not be the stars that they once were,” Perfeito said. “But the BRICS have two important things: They are organized and large economies.”