Brazil ratifies BRICS Bank, currency fund
June 9, 2015, 10:28 am

President of Brazil Dilma Rousseff at the BRICS Summit in Brazil where the five countries launched a $100 billion new development bank in July 2014 [PPIO]

Four of the five members have announced parliamentary approval of the twin financial instruments. South Africa is expected to ratify it this month.

According to the agreement signed last year, the headquarters of the BRICS Bank will be located in Shanghai, and its first president will be from India. The New Development Bank will provide a financing alternative to the World Bank, where the five large emerging markets have sought more clout.

BRICS leaders also announced the establishment of the BRICS Contingent Reserve Arrangement, a 100-billion-dollar fund from which the BRICS member countries will be allowed to draw funds when going through a crisis.

The Brazilian Senate also approved the creation of the fund on Monday.

Out of the $100 billion Fund, China will make the largest contribution of $41 billion. Brazil, Russia and India will each contribute $18 billion, and South Africa $5 billion.

“The fund is important to serve as a cushioning against crises,” said Brazilian Senator Delcidio Amaral, from the ruling Workers’ Party.

He added the BRICS Bank and the contingency fund will “serve to boost Brazil’s presence and importance in the world”.

New data unveiled by Brazil’s national statistics agency IBGE, in Rio de Janeiro, says gross domestic product contracted 0.2 per cent in the first three months of the year from the previous quarter.

Brazilian Foreign Minister Joaquim Levy announced fresh cuts to public spending and new taxes in a bid to restart the economy.

The Brazilian Congress last month approved three key bills pushed by President Dilma Rousseff to cut spending and raise taxes. The government claims this could save the state exchequer an estimated 15.7 billion reais ($4.9 billion) a year.

The Rousseff administration is trying to regain investor confidence even as it battles with the fastest inflation in more than a decade. The president is trying to push through unpopular measures like spending cuts and tax increases at a time when public patience with officials is at an all-time low, thanks largely to an ongoing corruption scandal at state oil giant Petrobras.

TBP and Agencies