There seem to be BRICS development bank problems even before the idea gets off the ground. In their recent summit in South Africa, the leaders of Brazil, Russia, India, China, and South Africa stated that they intend to create an international bank to support development in the developing world. The argument made by many in the developing world is that the World Bank, International Monetary Fund, and the Bank of International Development have a Western bias. This argument has been around for quite a while. The emerging powers of the BRICS group want more say in what goes on in the world and more say that is commensurate with their growing economic clout. The figure tossed around is $50 Billion in seed capital, evenly divided among the five BRICS nations. But, BRICS development bank problems are sure to rise. The complaint of these nations has been that the dominant economies of Europe and North America call the tune for who gets development money and who does not. There is a realistic fear that China with the largest economy and largest cash reserves will want to call the tune and cause BRICS development bank problems. Where will the headquarters of such a bank be? Who will be its officers and how will they be chosen? This news follows on the heels of a large Russian Chinese energy agreement in the making, a deal which holds much of the same promise of investment opportunity in these nations, and much of the same risk of failure.
He Who Has the Money Has the Power
Where the Europeans used to have colonies across the globe, the United States developed an economic hegemony in the years after World War Two. US military might and economic clout guaranteed allies in the fight against communism. Another way of looking at the contest between the USSR and the USA is that industrialized nations need both access to natural resources and people to sell their products to. As China has grown in economic clout it has followed the path of the Brits and the Yanks by spreading cash around the Third World in return for oil contracts, mineral rights, and access to markets. Where locals everywhere across the globe used to both envy and resent the Brits and then the Yanks, they now envy and resent the Chinese. An all too accurate complaint in Africa is that China is actively working to inhibit industrial development in Africa because they want African resources and they don’t want industrial competition with cheap African labor. An issue for South Africa is if they can ante up $10 Billion to have an equal share of bank power alongside the Chinese.
Playing One against the Other
It is a fair question to ask just how serious the plans are for a BRICS development bank especially considering potential BRICS development bank problems. By threatening to create their own bank the BRICS nations may really seeking more clout in the International Monetary Fund and World Bank where the head positions have always been held by an American and a European.
We have previously written about Investing in Foreign Stocks and Three Good Offshore Investment Ideas. To succeed in investments around the globe you need to start by paying attention. Then do your own fundamental analysis. The BRICS nations have significant growth potential and watching them for investment opportunities is a good idea.