Benefits of BRICS New Development Bank for Brazil

Francisco A. Laguna & Annapurna Nandyal

This week, we conclude our 4-part series on the BRICS’ New Development Bank (NDB), focusing on the potential benefits the NDB could offer Brazil, the only BRICS country in the Western Hemisphere.

The closest BRICS to Brazil is South Africa

The closest BRICS to Brazil is South Africa

Brazil is one of the world’s largest growing economies. In comparison to other BRICS, Brazil is seen as soft rising power rising, and it tends to be underrated: the country’s growth rate was just 3% in 2013, while China and India had 8% and 6%, respectively. Notwithstanding, Brazil is hot on the international stage: it held this year’s World Cup; it will soon be the home of the 2016 Olympics; and it hosted the 2014 Sixth Annual BRICS Summit this year. Heads of other South American states participated in the Summit for the first time, and the event turned out to be one of the region’s most significant geopolitical summits in recent history. Continue reading

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Benefits of BRICS New Development Bank for India

Francisco A. Laguna & Annapurna Nandyal

 Today, we continue our series on the impact of the BRICS New Development Bank (NDB), focusing on the potential benefits the NDB may provide India as well as a possible focuses the NDB can use to compete with historical institutions such as the World Bank and the IMF.

The 2008 global recession affected most parts of the world, and India was no exception. Apart from challenging economic conditions, there was a widespread criticism of the previous government’s policies which took a toll on the Indian economy. India’s newly elected Modi government, which recently completed its first 100 days, has promised to revive the economy and improve the ease of doing business in the country. As pointed out earlier in this series, it was India that proposed the establishment of a BRICS bank as a way of aligning the growing economies of the five emerging powers with those of the developed nations. India hopes to benefit greatly from the formation of the NDB and play a more prominent role in the global order in the 21st century.

Emblem of India Photo Credit: Zscout370 via Wikimedia Commons

Emblem of India
Photo Credit: Zscout370 via Wikimedia Commons

The NDB is already providing impetus for the BRICS to increase intra-member trade and investment. For instance, the tense relations between India and China have been an open secret despite the fact that they are strategic trade partners in Asia. Recently, trade volumes have lessened; however, after the creation of the NDB, the two countries have vowed to correct the decline. Since BRICS economies can trade in their local currencies instead of dollars, the Indian government has allowed domestic infrastructure companies to borrow yuan-denominated loans from the Chinese government to pay for imports from China. Continued improving relations between these two most populous countries could result in profound, short-term economic benefits.

The NDB is also influencing India’s relationship with Russia. India is the third largest importer of energy, and it may become the largest energy consumer. With instability in Middle East and West Asia, India is reaching out to traditional partners, like Russia, for help. Since 2005, India and Russia have been negotiating a gas project. After the announcement of NDB in July, both countries are actively working toward concluding the agreement. Analysts feel the countries’ increasing common interests could help finalize this much-needed energy deal.

Rupee Notes

Rupee Notes

Another energy-related event may also affect India. In a major shift in the policy, the World Bank has announced that it would restrict funding to new coal projects in developing countries and only fund the poorer nations on a case-by-case basis. As a result, developed countries such as US, United Kingdom and Netherlands have decided to stop funding coal projects. Many new coal plants are being built around the world, and the majority is or will be located in India and China. The new policy obviously impacts India: China can fund its own projects; India cannot. India’s extreme dependence on coal plants for its electricity generation and alternative source of income to fund coal projects must be addressed as quickly as possible. The NDB could play a crucial role by urging India and other developing countries to adopt solar panels and clean energy methods and offer cheaper loans for such power projects, while providing financing for existing coal projects.

Besides improving trade among the member states, the NDB needs to have broad policy framework to make the bank robust. For instance, climate change could have a profound impact on the BRICS. Global warming will have severe effect on developing countries affecting agriculture and tourism. The bank could focus on utilizing its funds on climate projects and educate poorer countries on climate change policy. In fact, BRICS leaders have advised their finance ministers to work out modalities for the bank to include environmental safeguards. This could help the NDB emerge as a bigger player in the future, thereby increasing the BRICS global economic influence.

TransLegal has correspondent offices in each of the BRICS. Contact us with your questions concerning doing business in Brazil, Russia, India, China and / or South Africa.

Can the BRICS New Development Bank Revive Russia?

Francisco A. Laguna & Annapurna Nandyal

The Russian Federation, formerly part of the Union of Soviet Socialist Republics (USSR) is the largest country in the world, sharing its borders with 14 countries spread over diverse geographies. It is the fifth largest economy in the world. In 2013, Russia was among the top three most attractive countries for investors and foreign direct investment, following the US and China, respectively. Russia’s status, however, has changed drastically. In March 2014, pro-Russian forces annexed Crimea, which shocked the international community. Countries like the US, Canada and Australia, as well as the European Union (EU) and international organizations have since imposed a series of sanctions against Russian businesses and individuals. Feeling isolated, there can be no better time for Russia to look for support from the BRICS countries.

Map of Russian Federation

Map of Russian Federation

Russia is unusual among the major economies in the way it relies on energy revenues to drive growth. Oil and natural gas are abundant and account for major exports from Russia to Western Europe countries. After the Crimean crisis, the West has completely banned imports from Russia, which has affected the Russian Ruble to an all- time low. Russia was also expelled from the G8 group of leading industrialized nations. In light of increasing international isolation, the creation of New Development Bank (NDB) is of particular significance for Russia: it opens new avenues for investment opportunities. Continue reading

Creation and Role of the BRICS New Development Bank

Francisco A. Laguna & Annapurna Nandyal

Map of BRICS countries

Map of BRICS countries

In July, Brazil hosted two important events, each significant in its own way: the FIFA World Cup; and the Sixth Annual Summit Meeting of Emerging Economies of Brazil, Russia, India, China and South Africa (BRICS). The members of BRICS meet annually to discuss the world economy, global development and the further strengthening of the BRICS group. Since its inception in 2009, BRICS have called for a greater role in international financial institutions like the World Bank and International Monetary Fund (IMF), as well as transparency in electing the leaders of these institutions. Despite robust economies, BRICS members continue to play a relatively minor role in global finance decisions. In a first step to provide an alternative to “Western-dominated” international financial institutions, the BRICS members announced a proposal to open the New Development Bank (NDB) during their 4th annual summit, held in Delhi, 2012. Continue reading

Russian Economic Activity in the Developing World

Francisco A. Laguna & Jennie Linder Cunningham

In an earlier series, we discussed China’s economic influence in Africa, Latin America and Southeast Asia.  Today, we look at Russia’s global economic activity.

Moscow City Photo Credit: Melberg Via Wikimedia Commons

Moscow City
Photo Credit: Melberg Via Wikimedia Commons

Despite overwhelmingly positive expectations for the financial and political liberalization of Russia and the former Soviet states, more than two decades later, the Russia of today far more closely resembles an economically liberalized but politically authoritarian state on the order of China rather than western countries. This is a particularly intriguing time to examine these tendencies in Russia, in the wake of several recent censorship and leaking scandals (Edward Snowden, Wikileaks, Bradley Manning, etc.) as well as Russia’s role in the brokering of the Syria chemical weapons solution. Continue reading