Finally, the BRICS put money where their mouths used to be. At the sixth summit of the BRICS (Brazil, Russia, India, China and South Africa), held in Fortaleza, Brazil, the leaders of five of the largest developing economies unveiled the New Development Bank, which is unofficially known as the BRICS bank. This announcement marks a new phase in the evolution of the BRICS. Until these five powerful countries agreed on this new vehicle of development financing, most observers had doubted whether the BRICS could accomplish anything more than the production of the rhetoric of cooperation and mutual respect.
To be sure, despite its name, the New Development Bank (NDB) is a relatively modest financial undertaking. According to the agreement reached by the BRICS, the NDB will have only $10 billion in paid-in capital (to be funded over seven years), with each country contributing $2 billion. In addition, the NDB will have $40 billion that will be paid “upon request”. The $50 billion forms the initial funding pool for the NDB. Another $50 billion will also be made available to the NDB by the BRICS in the future. Of the $100 billion capital, China will provide $41 billion, India, Russia, and Brazil will contribute $18 billion each. The remaining $5 billion will come from South Africa, the smallest economy in the BRICS.
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Minxin Pei is the Tom and Margot Pritzker '72 Professor of Government and a non-resident senior fellow at the German Marshall Fund of the United States.