São Paulo – The Brics, a group of emerging countries comprising Brazil, Russia, India, China and South Africa, has announced this Thursday (5th) the setting up of a US$ 100 billion fund. The Currency Reserve Agreement (CRA) will be available to the bloc’s nations at times of difficulties, and is also designed to stabilize the countries’ exchange rates. The Brics’ currencies are depreciating ever since the United States announced the gradual withdrawal of economic stimulus, which entails removing dollars from the market.
The fund was announced prior to the opening of the 8th Summit of the G20, a group of the world’s leading developed and emerging economies, held in Saint Petersburg, Russia. According to a statement from the Brazilian ministries of Finance and Foreign Relations, the CRA will be worth US$ 100 billion, of which US$ 41 billion will be contributed by China. Brazil, Russia and India will commit US$ 18 billion each. South Africa will supply US$ 5 billion.
The proposal to set up the CRA was passed in March this year, during the 5th Brics summit held in Durban, South Africa. Afterwards, according to the statement from the ministries, “a consensus has been reached on several key aspects and operational details” concerning the establishing of the CRA.
The Brics have not informed, however, when the fund will be made available. The Russian deputy Finance minister, Sergei Storchak, has told Reuters that details concerning the setting up of the CRA have not been agreed on yet by the Indian prime minister, Manmohan Singh, and the presidents of Brazil, Dilma Rousseff, China, Xi Jinping, South Africa, Jacob Zuma, and Russia’s Vladimir Putin.
Ever since the United States Central Bank (Fed) announced that it will gradually withdraw stimuli to the American economy, the dollar began hiking, especially in relation to the currencies of developing countries. By last August, the American currency had appreciated by 16.5% against Brazil’s real. In August, the Brazilian Central Bank started auctioning dollars on a daily basis to try and curb the currency’s hike. By 2:27 pm this Wednesday, the dollar was selling for R$2.332, down 1.06% from closing time on the preceding day.
In the same statement, the Brazilian ministries of Finance and Foreign Relations noted that the Brics has “progressed” with regard to another proposal discussed in Durban: the creation of a development bank to fund projects in the group’s countries. “Concerning the Bank, progress has been made in negotiations pertaining to its capital structure, shareholding structure, and governance. The Bank will have a startup capital of US$ 50 billion, committed by the Brics’ member countries.”
*Translated by Gabriel Pomerancblum