Mar 30, 2012
Center for Democracy and Civil Society

A New World Bank?

As expected, the Brics – Brazil, Russia, India, China and South Africa – did not achieve their proposed goal of creating a new development bank to rival the World Bank during their latest meeting, which ended yesterday. But they did not give up: the countries announced the creation of a working group to discuss the idea further and write a report on it for next year. I don’t see why.

The Hindu

Officially, the idea is to better fund initiatives and improve access to capital for developing countries. It seems to me, though, that what is behind the move is in reality exasperation with the slow pace of change in leadership and decision-making at the World Bank and the IMF.

Pressed with the news (and about to leave his post), Robert Zoellick, president of the World Bank, weighted on the issue saying in an interview with Reuters that a joint development bank by the Brics will have a hard time getting off the ground and could struggle to match the World Bank’s expertise.

He is probably right. The Brics are right to push for reform at Bretton Woods institutions, and it is about time developed countries cede some space. But it was just the other day that Brazil, for example, went from borrower to lender of the IMF, and It is not clear that the country and its colleagues are not getting ahead of themselves in their search for a more prominent global position.

Developing countries tend to suffer more from badly implemented programs and policies than from lack of capital per se.The Brics still suffer from pervasive corruption and not all are currently stars in the good policy map. Wouldn’t that be reflected in their new bank? Perhaps changing the way institutions we have today work would have more of an impact than creating new ones without solid new approaches in place.

Besides, Brics countries already have a strong presence in developmental initiatives, specially in Africa. Would the rise of a new bureaucracy and a new process be so much more helpful?

Not to mention the challenge of internal coordination. The Brics are a great brand, but they mean very little as a group beyond defying the West management of the global financial architecture. Brics compete amongst themselves and are found more often than not on opposing sides of foreign policy. This banking idea is barely a plan and it has already led to rivalries: China expressed in not so subtle a tone the desire to occupy its presidency, which bothered Brazil (afraid of of Chinese dominance) and India (which wanted a rotation of the future chairmen).

If the new bank the Brics envision changed the way development is addressed, it could be a good thing. The danger is of manufacturing another institution to replicate the same problems we see elsewhere today.


1 Comment

  • I agree, Andrea. It’s hard for me to see how this would work since we lack a BRICS theory of development. It’s hard for me to see how what kind of consensus they could find, other than that the US and Europe have too much influence over the World Bank and IMF. This won’t get them very far. A number of countries is Asia tried to start an Asian Monetary Fund about 10 years ago and it went nowhere for pretty much the same reasons you suggest. It seems to me the BRICS could better focus their efforts on gaining more leverage within existing institutions – as they did by pressing to expand the G7 to the G20 – than creating yet another dysfunctional multilateral institution. Really, we have more than enough of them already.

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