So the BRICS countries are meeting in Brazil right now, and their influential leaders have invited hilarious sideshows such as Nicolás Maduro to tag along. The big thing coming out of the meeting? A new BRICS development bank.
Hmm, a development bank for emerging economies. Now where have I heard that idea before?
You might be surprised to know that China already has a development bank of its own. So does Brazil. So does Russia. And so does South Africa. India, strangely enough, had one … but switched it over to being a commercial company a few years ago.
So, if all these countries already have development banks, why set up a new one? Simple. Headlines!
Sure, you might argue that together, these banks are stronger than separate. You might also contend that pooling their resources allows these countries to lower their risk. And perhaps there are enough economies of scale in banking to warrant bringing these countries together in a new institution.
As I write all that, I realize I’m grasping at straws. There is no rational reason for a BRICS bank … It might come about, but I have serious doubts of any lasting impact coming from such a thing. Whatever the BRICS bank can do, individual banks in these countries could also do. In fact, a BRICS bank might even be a bad idea, given how a bank headquartered in Shanghai will have little oversight as to how its money is spent in Boa Vista.
Which brings us back to wonder whatever happened to the Banco del Sur.
In 2007, Hugo Chávez convinced some of his South American pals to create the Bank of the South. Impressive headlines followed, and Nobel Prize winners chimed in saying it was a swell idea. Seven years later, and the Bank of the South is still an institution in paper only, apparently due to a lack of interest on the part of the Brazilians, the same ones that are “pushing” this new bank on newspapers the world over. Why, the Banco del Sur doesn’t even have its own website!
No worries though, I’m sure that in a few years and a few more summits, these details will be hammered out. I mean, it sounds really nice when you say the new bank will have “$7 billion in capital” or “countries have pledged $50 billion” … but the proof is in the pudding (or the feijoada, in this case). In the meantime, announcing a new development bank is nothing more than a swell time for unserious leaders such as Evo Morales to recycle their old speeches about how the financial institutions of the North are keeping his people poor.
A famous visionary once said “as we go from summit to summit, our people go from abyss to abyss.” Oh, how right he was.