News / Africa

BRICS Bank to Challenge Western Influence

A Mar. 29, 2012 photo shows (L-R) Brazil's President Dilma Rousseff, Russian Pres. Dmitry Medvedev, Indian PM Manmohan Singh, former Chinese Pres. Hu Jintao and South African Pres. Jacob Zuma at the BRICS Summit in New Delhi, India.
A Mar. 29, 2012 photo shows (L-R) Brazil's President Dilma Rousseff, Russian Pres. Dmitry Medvedev, Indian PM Manmohan Singh, former Chinese Pres. Hu Jintao and South African Pres. Jacob Zuma at the BRICS Summit in New Delhi, India.
Anita Powell
Brazil, Russia, India, China and South Africa formed their economic partnership as part of a drive to counter traditional western economic and political supremacy. The group, known as BRICS, plans to form its own development bank at this year’s summit in South Africa. But can they afford to turn their backs on the West’s most powerful ambassador - the dollar? Experts don’t think so.

The U.S. dollar drives development around the world, as the currency of choice of major lending institutions like the World Bank and the International Monetary Fund.
 
BRICS says it wants its development bank to fill the gaps left by those major banks and reach out to the developing world. BRICS representatives have said their funds will be loaned out for infrastructure projects in developing nations. Preliminary reports suggest each of the five nations will put $10 billion into the bank.
 
But what currency will this new bank use? That, experts say, is the $50 billion  question.
 
Anil Sooklal, South Africa’s ambassador to BRICS, said details are still being finalized. But he noted that the bloc had previously agreed to trade, when possible, in local currencies - the real, the ruble, the rupee, the renminbi and the rand.
 
“Well, as you know, last year at the summit in [New] Delhi, we signed an agreement, an interbank agreement, on trading in local currencies among BRICS countries," he said. "So you already have an agreement on trading in local currencies. But in terms of the currency to be used by the BRICS bank, that is also an issue that will be put to the finance ministers to take a decision on.”
 
But none of those currencies has the chops to hold up a bank, as none are considered international reserve currencies. Those include the U.S. dollar, the British pound and the euro - which are often held in reserve by governments and major financial institutions.
 
Nigeria, the continent’s second-largest economy after South Africa, gave China’s currency a vote of confidence last year, by becoming the first African nation to invest significantly in the renminbi, by adding $500 million worth - or more than 3.1 billion renminbi - to its reserves.
 
Standard Bank analyst Simon Freemantle said he thinks China will try to use the BRICS bank to push the status of its currency.  “I think very core to the bank from China, at least, has been the desire to use it as a means to continue the internationalization of the renminbi," he said.
 
"The idea would not be not to host it in a single currency. … But there will also be benefits in removing the dollar from bilateral trade between, say, South Africa and Brazil, South Africa and India, if that can happen. But I think principally, it’ll be a push for RMB internationalization," Freemantle added.
 
But he said it is unlikely that this move will unseat the major reserve currencies. He also said trade within the BRICS group makes up a small portion of international trade - which is mainly in dollars.
 
“I think it’ll be a very long time before the dollar’s status at the global reserve currency is offset, or diminished," he said. "This would really just be an ambition to lower the costs of trading and investing between BRICS members and between China and Africa … So, it’ll be some time, and I expect that the effect on the dollar will be very minimal, at least for the foreseeable future.”
 
But the future trends are undeniable. Chinese investment in Africa reached nearly $20 billion last year.
 
And the renminbi is playing an increasingly larger role here. Freemantle estimates that as much as 40 percent of China-Africa trade could be conducted in renminbi in the next two years, up from about 10 percent now.

You May Like

Video Snowstorm Sweeps Northeastern US

'This is nothing like we feared it would be,' New York City Mayor Bill de Blasio says; he had warned storm could be one of worst in city history More

Millions of Displaced Nigerians Struggle With Daily Existence

Government acknowledges over a million people displaced in 2014 due to fight against Boko Haram insurgency More

Facebook: Internal Error to Blame for Outages

Temporary outage appeared to spill over and temporarily slow or block traffic to other major Internet sites More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Obama Urges Closer Economic Ties During Historic India Visiti
X
Aru Pande
January 26, 2015 9:33 PM
U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video US, EU Threaten New Russia Sanctions Over Ukraine

U.S. President Barack Obama has blamed Russia for an attack by Ukrainian separatists that left dozens dead in the port of Mariupol and cast further doubt on the viability of last year’s cease-fire with the Kyiv government. VOA’s Michael Bowman reports from Washington.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Kerry Warns Against Violence in Nigeria Election

US Secretary of State John Kerry visited Nigeria Sunday in a show of the level of concern within the U.S. and the international community over next month’s presidential election. Chris Stein reports.
Video

Video Zoo Animals Show Their Artistic Sides

The pursuit of happiness is so important, America's founding fathers put it in the Declaration of Independence. Any zookeeper will tell you animals need enrichment, just like humans do. So painting, and even music, are part of the Smithsonian National Zoo's program to keep the animals happy. VOA’s June Soh met some animal artists at the zoo in Washington. Faith Lapidus narrates.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Saudi, Yemen Developments Are Sudden Complications for Obama

The death of Saudi Arabia's King Abdullah and the collapse of Yemen’s government have cast further uncertainty on U.S. efforts to fight militants in the Middle East and also contain Iran’s influence in the region. VOA White House correspondent Luis Ramirez reports on the new complications facing the Obama administration and its Middle East policy.
Video

Video Progress, Some Areas of Disagreement in Cuba Talks

U.S. and Cuban officials are reporting progress from initial talks in Havana on re-establishing diplomatic ties. U.S. Assistant Secretary of State (for Western Hemisphere Affairs) Roberta Jacobson said while there was agreement on a broad range of issues, there also are some “profound disagreements” between Washington and Havana. VOA State Department correspondent Pam Dockins has the story.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid