The launch of the BRICS Bank—or, as it is more formally known, the New Development Bank formed by Brazil, Russia, India, China and South Africa—took place in advance of a July summit of representatives of member nations, who gathered in Ufa, Russia to strategize and nail down some of the necessary actions.
The five countries have big plans for the new institution, which is expected to begin its work of financing new development in various areas come 2016. But their concerted effort to work together is revealing additional priorities as the bank comes closer to actually engaging in business, and some of those priorities came clear at the summit that followed the launch.
People with interests that could be affected by the NDB’s very existence, never mind a closer relationship among the BRICS countries, need to be watching closely, lest they be taken by surprise and watch their investments head south, or east, or west, or north.
Here’s a look at the top 3 results of the launch and the summit that investors should know about.
1. Joint efforts to stabilize BRICS economies.
The tanking price of oil has not only thrown a wrench into numerous economies globally, such as Russia’s, it’s also made financial markets more than a little wary, although that’s manifesting in a range of trends that don’t necessarily follow the action. China’s devaluation of the yuan, for instance, has caused speculation on everything from a collapse of the Chinese economy to a currency that’s better able to deal with international commerce.
But at the summit, BRICS leaders struck a more harmonious chord than they have in the past, agreeing that they would coordinate their efforts to keep their economies on a stable footing. After kicking off the development bank with a total of $50 billion in starting capital, leaders went further and launched a $100 billion pool of foreign currency reserves designed to prevent any of the five nations from suffering liquidity issues.
While there’s no indication that any of the member nations intend to draw on it any time soon, China is expected to kick in $41 billion, while Brazil, India and Russia are slated to contribute $18 billion apiece. South Africa’s contribution comes in at $5 billion. This new all-for-one-and-one-for-all spirit, if it lasts, could definitely come into play to combat the five countries’ various economic challenges without intervention from the West.
2. Closer Russian ties with the East.
Caught up in sanctions from the U.S. and EU, Russia’s in a tough spot, particularly since President Vladimir Putin isn’t backing away from his stance on Crimea. But one thing that clearly emerged from the summit was Putin’s pivot toward the East. Not only has he thrown Russia’s hat into the ring encompassed by the BRICS bank, at the summit he hosted a joint session of the BRICS countries and the Shanghai Cooperation Organization, the latter composed of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan for the purpose of defense.