Brics opens amid optimism

2013-03-26 00:00

THE fifth Brazil, Russia, India, China and South Africa (Brics) summit opens today amid optimism among leading South African economists that the gathering will focus on the establishment of a development bank and stimulate trade between the countries.

Andrew Layman, chief executive of the Durban Business Chamber of Commerce and Industry, said the development of mutually constructive relationships within a bloc like Brics was a progressive process.

However, some civil rights groups are pessimistic about what the conference can achieve because of human and civil rights violations in some of the member countries.

Layman said the Brics summits “require a great deal of discussion and negotiation in order to regularise trade conditions among the countries”. He added that the summit could announce the creation of a Brics development bank.

Such a bank would fund infrastructure development in the member countries and facilitate the exchange of their currencies.

Catherine Grant, an economist with the South African Institute of International Affairs, said the motivation for a development bank for Brics was that the Bretton Woods institutions — International Monetary Fund and the World Bank — were not meeting the needs of developing economies. However, the establishment of a development bank was a massive task that would not happen overnight.

“It will take years to raise funds and establish a mandate and identify the location of the bank,” she said. Together the Brics nations have $4,4 trillion (R40,9 trillion) in foreign reserves.

Simon Freemantle, a research analyst with Standard Bank, said the creation of a development bank was sure to feature strongly at the fifth summit, but he explained that it would not be a counterweight to institutions such as the World Bank.

“Yes, the dominance of the of the U.S. and Europe in Bretton Woods institutions is a source of contention for Brics. However, the bank will serve as an auxiliary funding institution which will be more aligned to Brics developmental agenda,” he added.

Brazil, Russia, India and China held their first summit in 2009 and invited South Africa to join them in December 2010.

The theme at this year’s summit is “Brics and Africa — partnerships for integration and industrialisation”.

Grant said a core issue that could be up for discussion would be the conflicts in Syria, Mali and the Central African Republic, where several South African National Defence Force soldiers were killed when rebels seized the capital, Bangui, on Sunday

The summit will focus largely on the ways in which the members can stimulate business.

Layman said at least one session, the business council, would be devoted to discussions among business representatives of each country.

But although the summit had created a lot of expectations, “it is unlikely to provide business opportunities itself”, he said. The value of the summit to local businesses would be realised later as the relationships among the five countries were cemented and enhanced.

“This is particularly important for south African companies because in economic terms SA is the junior partner and through Brics we will be gaining privileged access to over 40% of the world’s market,” said Layman.

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