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BRICS to decide on outsiders’ bids for Bank shareholding
July 10, 2014, 7:12 am

 Participants in a BRICS leaders' meeting sit at a table during a session at the G-20 Summit in St. Petersburg, Russia, Thursday, Sept. 5, 2013 [AP]

Participants in a BRICS leaders’ meeting sit at a table during a session at the G-20 Summit in St. Petersburg, Russia, Thursday, Sept. 5, 2013 [AP]

The BRICS countries will initially underwrite $50 billion in capital to the BRICS bank, in equal parts of $10 billion each, said a Brazilian Foreign Ministry official in Rio de Janeiro. The $50 billion will be eventually built up to $100 billion.

The $100 billion BRICS Bank and the $100 billion contingency reserve fund, agreed upon during the Durban Summit, will act as a buffer against volatile global monetary conditions.

“The completion of these two initiatives will carry a strong message about the willingness of the BRICS member countries to deepen and strengthen their partnerships economically and financially,” said José Alfredo Graça Lima, Under-Secretary-General for Political Affairs at the Brazilian Ministry of Foreign Affairs.

The Brazilian official also said that BRICS member states will decide on bids by other countries, investment banks and multilateral institutions to become shareholders of the BRICS bank.

At a Summit next week, leaders of the world’s major emerging economies will sign into creation a joint foreign exchange reserves pool and an infrastructure bank.

China will contribute $41 billion, Brazil, Russia and India will each contribute $18 billion and South Africa will contribute $5 billion to the initial capital of the Contingency Reserve Arrangement (CRA). The arrangement will be modeled on the Chiang Mai Initiative of southeast Asian countries, said Lima.

A board of governors of the fund and a technical advisory board will grant access to resources to the contingency fund which could be operational by 2015.

The Bank’s location and chairmanship are yet to be decided although Shanghai, Johannesburg, New Delhi and Moscow are the four possible locations for its headquarters, said Lima. The Bank will have a rotating chair similar to the BRICS Business Council.

The BRICS Bank will finance infrastructure and sustainable development projects in the BRICS member nations and other developing countries, said Lima.

‘Social inclusion’ will be a major theme of this year’s BRICS Summit with Brazil having successfully steered a revolutionary welfare program called ‘Bolsa Familia‘, which the government claims has lifted millions of people out of poverty and millions into the middle class.

The five founding members of the new Bank will retain controlling interest should any new members be admitted and the BRICS share will never dip below 55 per cent. Several developing countries including Argentina, Iran and Egypt have expressed the desire to join the bloc.