BRICS

BRICS is the acronym for an association of five major emerging national

economies: Brazil, Russia, India, China and South Africa. The grouping
was originally known as "BRIC" before the controversial inclusion of South
Africa in 2010. The BRICS members are all developing or newly
industrialized country countries, but they are distinguished by their large,
sometimes fast-growing economies and significant influence on regional
affairs; all five are G-20 members. However, BRICS countries have
significantly slowed down with South Africa only growing a 1% in 2015
similar to the 1.6% a year from 1994 to 2009, brazil in its worst recession
since the 1930s by some measures ,Russia in a recession as oil prices
tailspin and sanctions weigh, and China's slowdown is set be a drag on
global growth and is reported to be the slowest in the last 25 years bringing
the average GDP growth of the BRICS to near zero. Since 2009, the BRICS
nations have met annually at formal summits. Russia hosted the group’s in
July 2015. India is going to host the BRICS conference in Goa in October
2016. The term does not include more developed countries such as South

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 Korea, Mexico and Turkey for which other acronyms and group
associations were later created.

As of 2015, the five BRICS countries represent over 3 billion people, or 42% of
the world population; all five members are in the top, and four are in the top 10.
The five nations have a combined nominal GDP of US$16.039 trillion,
equivalent to approximately 20% of the gross world product, and an estimated
US$4 trillion in combined foreign reserves. The BRICS have received both
praise and criticism from numerous commentators. Bilateral relations among
BRICS nations have mainly been conducted on the basis of non-interference,
equality, and mutual benefit.

History

The term "BRIC" was coined in 2001 by then-chairman of Goldman

Sachs Asset Management, Jim O'Neill, in his publication Building Better Global
Economic BRICS .The foreign ministers of the initial four BRIC states (Brazil,
Russia, India, and China) met in New York City in September 2006 at the
margins of the General Debate of the UN General Assembly, beginning a series
of high-level meetings. A full-scale diplomatic meeting was held in
Yekaterinburg, Russia, on 16 June 2009.

First BRIC summit

The BRIC grouping's first formal summit, also held in Yekaterinburg,

commenced on 16 June 2009, with Luiz Inácio Lula da Silva, Dmitry
Medvedev, Manmohan Singh, and Hu Jintao, the respective leaders of Brazil,
Russia, India and China, all attending. The summit's focus was on means of
improving the global economic situation and reforming financial institutions,

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and discussed how the four countries could better co-operate in the
future. There was further discussion of ways that developing countries, such as
the BRIC members, could become more involved in global affairs.

In the aftermath of the Yekaterinburg summit, the BRIC nations announced the
need for a new global reserve currency, which would have to be "diversified,
stable and predictable". Although the statement that was released did not
directly criticise the perceived "dominance" of the US dollar – something that
Russia had criticised in the past – it did spark a fall in the value of the dollar
against other major currencies.

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Entry of South Africa

In 2010, South Africa began efforts to join the BRIC grouping, and the process
for its formal admission began in August of that year. South Africa officially
became a member nation on 24 December 2010, after being formally invited by
the BRIC countries to join the group. The group was renamed BRICS – with the
"S" standing for South Africa – to reflect the group's expanded membership. In
April 2011, the President of South Africa, Jacob Zuma, attended the2011
BRICS summit in Sanya, China, as a full member.

Developments

The BRICS Forum, an independent international organisation encouraging

commercial, political and cultural cooperation between the BRICS nations, was
formed in 2011. In June 2012, the BRICS nations pledged $75 billion to boost
the lending power of the International Monetary Fund (IMF). However, this
loan was conditional on IMF voting reforms. In late March 2013, during the

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fifth BRICS summit in Durban, South Africa, the member countries agreed to
create a global financial institution which they intended to rival the western-
dominated IMF and World Bank. After the summit, the BRICS stated that they
planned to finalise the arrangements for this New Development Bank by 2014.
However, disputes relating to burden sharing and location slowed down the
agreements.

At the BRICS leaders meeting in St Petersburg in September 2013, China

committed $41 billion towards the pool; Brazil, India and Russia $18 billion
each; and South Africa $5 billion. China, holder of the world's largest foreign
exchange reserves and who is to contribute the bulk of the currency pool, wants
a greater managing role, said one BRICS official. China also wants to be the
location of the reserve. "Brazil and India want the initial capital to be shared
equally. We know that China wants more," said a Brazilian official. "However,
we are still negotiating, there are no tensions arising yet” .On 11 October 2013,
Russia's Finance Minister Anton Siluanov said that a decision on creating a
$100 billion fund designated to steady currency markets would be taken in early
2014. The Brazilian finance minister, Guido Mantega stated that the fund would
be created by March 2014. However, by April 2014, the currency reserve pool
and development bank had yet to be set up, and the date was rescheduled to
2015. One driver for the BRICS development bank is that the existing
institutions primarily benefit extra-BRICS corporations, and the political
significance is notable because it allows BRICS member states "to promote
their interests abroad... and can highlight the strengthening positions of
countries whose opinion is frequently ignored by their developed American and
European colleagues."

In March 2014, at a meeting on the margins of the Nuclear Security Summit in

The Hague, the BRICS Foreign Ministers issued a communique that "noted
with concern, the recent media statement on the forthcomingG20 Summit to be

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held in Brisbane in November 2014. The custodianship of the G20 belongs to
all Member States equally and no one Member State can unilaterally determine
its nature and character." In light of the tensions surrounding the 2014 Crimean
crisis, the Ministers remarked that "The escalation of hostile language, sanctions
and counter-sanctions, and force does not contribute to a sustainable and
peaceful solution, according to international law, including the principles and
purposes of the United Nations Charter." This was in response to the statement
of Australian Foreign Minister Julie Bishop, who had said earlier that Russian
President Vladimir Putinmight be barred from attending the G20 Summit in
Brisbane.

In July 2014, the Governor of the Russian Central Bank, Elvira Nabiullina,
claimed that the "BRICS partners the establishment of a system of multilateral
swaps that will allow to transfer resources to one or another country, if needed"
in an article which concluded that "If the current trend continues, soon the dollar
will be abandoned by most of the significant global economies and it will be
kicked out of the global trade finance."

Over the weekend of 13 July 2014 when the final game of the World Cup was
held, and in advance of the BRICS Fortaleza summit, Putin met his
homologue Dilma Rouseff to discuss the BRICS development bank, and sign
some other bilateral accords on air defence, gas and education. Rouseff said that
the BRICS countries "are among the largest in the world and cannot content
themselves in the middle of the 21st century with any kind of dependency." The
Fortaleza summit was followed by a BRICS meeting with the Union of South
American Nations president's in Brasilia, where the development bank and the
monetary fund were introduced. The development bank will have capital of
US$50 billion with each country contributing US$10 billion, while the
monetary fund will have US$100 billion at its disposal.

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On 15 July, the first day of the BRICS 6th summit in Fortaleza, Brazil, the
group of emerging economies signed the long-anticipated document to create
the US$100 billion New Development Bank (formerly known as the "BRICS
Development Bank") and a reserve currency pool worth over another US$100
billion. Documents on cooperation between BRICS export credit agencies and
an agreement of cooperation on innovation were also inked.

At the end of October 2014, Brazil trimmed down its US government holdings
to US$261.7 billion; India, US$77.5 billion; China, US$1.25 trillion; South
Africa, US$10.3 billion.

In March 2015, Morgan Stanley stated that India and Indonesia had escaped
from the 'fragile five' (the five major emerging markets with the most fragile
currencies) by instituting economic reforms. Previously, in August 2013,
Morgan Stanley rated India and Indonesia, together with Brazil, Turkey and
South Africa, as the 'fragile five' due to their vulnerable currencies. But since
then, India and Indonesia have reformed their economies, completing 85% and
65% of the necessary adjustments respectively, while Brazil had only achieved
15%, Turkey only 10%, and South Africa even less.

After the 2015 summit, the respective communications ministers, under a

Russian proposal, had a first summit for their ministries in Moscow in October
where the host minister, Nikolai Nikiforov, proposed an initiative to further
tighten their information technology sectors and challenge the monopoly of the
United States in the sector.

Since 2012, the BRICS group of countries have been planning an optical fibre
submarine communications cable system to carry telecommunications between
the BRICS countries, known as the BRICS Cable. Part of the motivation for the
project was the spying of the National Security Agencyon all
telecommunications that flowed across the US.

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Summits
The grouping has held annual summits since 2009, with member countries
taking turns to host. Prior to South Africa's admission, two BRIC summits were
held, in 2009 and 2010. The first five-member BRICS summit was held in 2011.
The most recent BRICS summit took place in Ufa, Russia, from 8 to 9 July
2015.

Potential additional members

Afghanistan, Argentina, Indonesia and Turkey have expressed strong interest in
full membership of the BRICS, while Egypt, Iran, Nigeria, Sudan, Syria and
most recently Bangladesh and Greece have also expressed interest in joining
BRICS.

Financial Structure
Currently, there are two components that make up the financial architecture of
BRICS, namely, the New Development Bank (NDB) and the Contingent
Reserve Arrangement (CRA). Both of these components were signed into treaty
in 2014 and became active in 2015.

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New Development Bank

The New Development Bank (NDB), formerly referred to as the BRICS

Development Bank, is a multilateral development bank operated by the
BRICS states. The bank's primary focus of lending will be infrastructure
projects with authorized lending of up to $34 billion annually. South Africa
will be the African Headquarters of the Bank named the "New Development
Bank Africa Regional Centre”. The bank will have starting capital of $50
billion, with capital increased to $100 billion over time. Brazil, Russia, India,
China and South Africa will initially contribute $10 billion each to bring the
total to $50 billion.

BRICS CRA
The BRICS Contingent Reserve Arrangement (CRA) is a framework for
providing protection against global liquidity pressures. This includes currency
issues where members' national currencies are being adversely affected by
global financial pressures. The CRA is generally seen as a competitor to the
International Monetary Fund (IMF) and along with the New Development
Bank is viewed as an example of increasing South-South cooperation. It was

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established in 2015 by the BRICS countries Brazil, Russia, India, China and
South Africa. The legal basis is formed by the Treaty for the Establishment of a
BRICS Contingent Reserve Arrangement, signed at Fortaleza, Brazil on 15 July
2014. It entered into force upon ratification by all BRICS states, announced at
the 7th BRICS summit in July 2015.

BRICS payment system

At the 2015 BRICS summit in Russia, ministers from BRICS nations, initiated
consultations for a payment system that would be an alternative to the SWIFT
system. Russian Deputy Foreign Minister Sergey Ryabkov stated in an
interview, "The finance ministers and executives of the BRICS central banks are
negotiating ... setting up payment systems and moving on to settlements in
national currencies. SWIFT or not, in any case we’re talking about ... a
transnational multilateral payment system that would provide greater
independence, would create a definite guarantee for BRICS."

The Central Bank of Russia (CBR) also started consultations with BRICS
nations for a payment system that would be an alternative to the SWIFT system.
The main benefits highlighted were backup and redundancy in case there were
disruptions to the SWIFT system. The Deputy Governor of the Central Bank of
the Russia, Olga Skorobogatova stated in an interview, "The only topic that may
be of interest to all of us within BRICS is to consider and talk over the
possibility of setting up a system that would apply to the BRICS countries, used
as a backup."

China has also initiated development of their own payment system called CIPS
that would alternative to the SWIFT system. The Cross-Border Inter-Bank
Payments System (CIPS) is a planned alternative payments system to
SWIFT which would provide a network that enables financial

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institutions worldwide to send and receive information about financial
transactions in a secure, standardized and reliable environment.[72]

Reception

In 2012, Hu Jintao, who at the time was President of China and Paramount
leader, described the BRICS countries as defenders and promoters of
developing countries and a force for world peace. Western analysts have
highlighted potential divisions and weaknesses in the grouping, including
significant economic instabilities, disagreements between the members over UN
Security Council reform, and India and China's disputes over territorial issues.

In June 2015, Jim Rogers said that he does not see any current alternative to US
dollar and that “The world needs something to compete with the US-dominated
institutions, some of them - the World Bank and the IMF. So, if BRICS offer
any new structures that can compete with these long-standing ... institutions, it
will be very good.”

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Current BRICS summit attendees

From left to right:-

 Russia:- Vladimir Putin, President(Head of State
 India:- Narendra Modi ,Prime Minister(Head of
Government)
 Brazil:- Dilma Rousseff, president(Head of state and govt.
 China:- Xi Jinping ,President (Head of State)
 South Africa:- Jacob Zuma, President (Head of State and
Government)

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