The western world may be at odds with Russian leadership but the emerging markets that make up the BRICS are a-ok. Russian state media reported on Friday that Russian Finance Minister Anton Siluanov will likely head up the board of governors at the New Development Bank (NDB) later this year.
"If we manage to hold the first board meeting, Siluanov will become the chairperson," Deputy Finance Minister Sergei Storchak told Rossiya-24 TV channel today.
The first board meeting is supposed to take place in April. The NDB, dubbed the BRICS Bank by the media, will be up and running by year's end.
Brazil, India, China and South Africa, all partners in the NDB, have not come out with any official word of support for Siluanov, or have their congressional leaders ratified their participation in the bank. However, it is unlikely that local politicians will nix NDB or that there will be any political rivalries as to who will head what. Brazil, Russia, India, China and South Africa have been talking about creating this thing for years. Many have suggested it was a defacto alternative to the World Bank.
The NDB charter was agreed upon by the country's presidents last July in Fortaleza, the largest city in Ceara state in northeastern Brazil. Russia was the first country to make the bank official, with its parliament ratifying the bank this week in Moscow. Storchak said on Russian TV that he expected the bank to be ratified by other members before the BRICS Summit in Russia this July.
The bank starts out with $100 billion set aside from central bank reserves of all five members. For now, loans will be made in U.S. dollars, making this hardly an alternative to the existing development banks in the region.
It makes sense that Russia would be the first to ratify the bank. The NDB now is in their political interest, perhaps more so than in Russia's economic interest. The country is currently viewed by the West as the biggest antagonist state around, with sanctions against Russia heading into a year starting next month. Since then, Russia's government has been touting non-dollar deals with China, a minor trading partner at the moment, and created a small non-euro customs union with Belarus, Armenia and Kazakhstan.
There is a chance that Russia will try convincing NDB members to lend in each other's currency instead of the dollar. That will not be known until the first loan is made, however. Large development banks tend to lend in various currencies, anyway. The Asian Development Bank, one of the world's largest, has a local currency loan product. And the world's largest development bank by lending portfolio, Brazil's BNDES, loans are based on a basket of currencies, including the dollar.
The NDB will be headquartered in Shanghai.
The BRICS have seen their better days. Once the driver of economic growth, cuts in stimulus spending, the bursting of the commodities bull market, and economic reforms in China have turned many investors off. Nevertheless, the BRICS account for nearly 20% of the world's GDP, or $16 trillion. Their total trade value is equal to 17% of the world's total, or roughly $6.15 trillion, according to the country's last BRICS Summit.
Over the long haul, economists and investors generally view the NDB as a positive and as a show of strength within the big emerging markets.
