WASHINGTON – Fed up with U.S. dominance of the global financial system, five emerging market powers this week will launch their own versions of the World Bank and the International Monetary Fund.
Brazil, Russia, India, China and South Africa – the so-called BRICS countries – are seeking alternatives to the existing world order, said Harold Trinkunas, director of the Latin America Initiative at the Brookings Institution.
At a summit today through Thursday in Brazil, the five countries will unveil a $100 billion fund to fight financial crises, their version of the IMF. They will also launch a World Bank alternative, a new bank that will make loans for infrastructure projects across the developing world.
The five countries will invest equally in the lender, tentatively called the New Development Bank. Other countries may join later.
The BRICS powers are still jousting over the location of the bank’s headquarters – Shanghai, Moscow, New Delhi or Johannesburg. The headquarters skirmish is part of a larger struggle to keep China, the world’s second-biggest economy, from dominating the new bank the way the U.S.has dominated the World Bank.
The bloc comprises countries with vastly different economies, goals and political systems – from India’s raucous democracy to China’s one-party state.
Whatever their differences, the BRICS countries have a shared desire for a bigger voice in global economic policy. Each has had painful experiences with Western financial dominance: They’ve contended with economic sanctions imposed by Western powers. Or they’ve been forced to make painful budget cuts and meet other strict conditions to qualify for emergency IMF loans.
The IMF and the World Bank seem to be taking the new challengers in stride.
All initiatives that seek to strengthen the network of multilateral lending institutions and increase the available financing for development and infrastructure are welcome, IMF spokeswoman Conny Lotze said. What is important is that any new institutions complement the existing ones.