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Master of Arts – Integrated Studies

THE BRICS NEW DEVELOPMENT BANK:

A PARADIGM SHIFT IN WORLD GOVERNANCE?

By

ALLISON E. BETTON

Integrated Studies Final Project Essay (MAIS 700)

submitted to Dr. Angela Specht

in partial fulfillment of the requirements for the degree of

Master of Arts – Integrated Studies

Athabasca, Alberta

April 2016

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Master of Arts – Integrated Studies

ABSTRACT

In July 2014, the “BRICS” countries (Brazil, Russia, India, China, and South

Africa) announced the launch of the New Development Bank (NDB). The launch

is the culmination of discussion and cooperation that began within the context of

the 2009 global financial meltdown and the BRICS’ ongoing efforts to achieve

reforms to international financial institutions. This paper argues that the launch of

the NDB must be understood as a paradigm shift in global governance. Through

growing collaboration, shared frustration with the pace of reform, and shared

recognition of insufficient infrastructure funding for developing countries, the

BRICS have seized the opportunity to establish an alternative global financial

governance structure.

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Table of Contents Introduction .............................................................................................................................................. 4

Background ........................................................................................................................................... 4

Literature Review ...................................................................................................................................... 6

The BRICS as a Collective ...................................................................................................................... 6

The Bretton Woods Institutions: Change From Within? ...................................................................... 8

Potential and Capacity of BRICS’ Influence ........................................................................................... 9

The BRICS’ Leaders’ Mindset: Joint Statements, Declarations and Action Plans................................... 10

Reform of International Financial Institutions .................................................................................... 11

Capacity and Availability of Development Funding ............................................................................ 12

BRICS’ Cooperation ............................................................................................................................. 14

The BRICS’ View of a “Harmonious World” ............................................................................................ 17

A New Development Bank ...................................................................................................................... 18

Glossary of Terms and Acronyms ........................................................................................................... 20

Bibliography ............................................................................................................................................ 21

Introduction

The transformation of the BRICs acronym from an investment term into a household name in international politics is one of the most important developments in international politics in the past decade.1

On July 15, 2014, the BRICS countries (Brazil, Russia, India, China and South Africa) announced the

establishment of the New Development Bank (NDB). The NDB was launched with contributions totaling

$100 billion from the partner countries and a reserve currency pool of over $100 billion. Depending on

the point of view, the NDB is either a pointed challenge to the “western hegemony” of the World Bank,

International Monetary Fund (IMF) and the World Trade Organization or the logical next step in

globalization whereby emerging economies play a greater role in supporting developing economies. The

BRICS themselves describe the NDB as “…a development institution that was created…to mobilize

resources for infrastructure and sustainable development projects.”2

Through an exploration of the conditions and factors (economic, political, and historical) that combined

to create an environment where the BRICS chose to establish a development bank to undertake the

same work as existing international financial institutions, this paper contends that the NDB should be

viewed as a paradigm shift in global governance. This research was approached as a single case study,

with the July 2009 first official meeting of BRICs3 leaders at the G8 Summit in Japan as the start date and

the July 2014 announcement establishing the NDB as the end date. As access to BRICS leaders,

government members, and their political staff to explore their mindset leading to the NDB was not

possible, discourse analysis was utilized to examine the joint statements/declarations released at the

end of each BRICS’s summit. These documents provide insight into this decision. Political texts are

particularly well-suited for discourse analysis as leaders’ communications staff spend considerable time

negotiating content and choosing language with specific intent. In addition to the declarations, a

representative sample of writings from BRICS countries was examined. These offered insight into the

BRICS’ perspectives on anticipated benefits/outcomes from the creation of the NBD.

Background

In 2001, Goldman Sachs’ economist Jim O’Neill wrote an article entitled “Building Better Global

Economic BRICs.” O’Neill provided the first reference to “BRICs” – Brazil, Russia, India and China – an

acronym that caught the financial and academic worlds’ attention. The article explored which of the

BRICs should be included in the (at the time) G7: “Looking at each of Brazil, Russia, India and China, the

case for the inclusion of China is overwhelming. The case for the other three is less clear-cut, but…the

case for the inclusion of all three is at least as strong as Canada, and in some ways, as strong as Italy.”4

1 Oliver Stuenkel. "Emerging Powers and Status: The Case of the First BRICs Summit." Asian Perspective 38, no. 1 (January 2014): 89. SocINDEX with Full Text, EBSCOhost (accessed March 5, 2016). 2 “Lagarde says IMF to cooperate with China-led AIIB Bank.” BBC Business, March 22, 2015, accessed March 5, 2016, http://www.bbc.com/news/business-32007090. 3 Brazil, Russia, India and China. South Africa joined in 2011 and the acronym became “BRICS.” 4 Jim O’Neill, 2001, Building Better Global Economic BRICs, Global Economics, 66. Retrieved from: http://www.goldmansachs.com/our-thinking/archive/.../build-better-brics.pdf

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His argument that the BRICs are a group capable of driving global change changed the tone of discussion

in subsequent years.

Virtually every writer encountered during the literature review referenced O’Neill’s article, typically

describing the article as a pivotal moment in how economists, political scientists, historians, and so

forth, perceived the BRICs and their potential impact on global economic and political systems and

institutions. A mass migration occurred, from viewing the BRICs as distinct entities to a homogenous

group wielding sizable political and economic power. The BRICS countries are “home to 46% of the

world's population” and their combined economies represent 18% of the global GDP.5

Many writers identify the 2008 financial crisis as the “lever” that increased the BRICs’ participation on

the global stage. The BRICs countries weathered the crisis more effectively than the G7. As Stuenkel

describes, “The results were palpable: prior to the Group of 20 (G20) summit in London in April 2009,

the BRIC countries were able to act as agenda setters and considerably influence the final G20

declaration—all by making use of the BRIC grouping, a vehicle that had, in its political dimension, barely

existed before the crisis.“6 Gray and Murphy argue that by 2009, "...the ‘BRIC’ acronym ceased to be

simply a convenient category indicating countries with the greatest investment potential, and became a

political reality as Brazil, Russia, India and China (and from 2010 South Africa) sought to forge close

political ties."7 Key events in the BRICS emergence and the launch of the NDB are summarized below:

Date Attendees Location Key Statements/Developments

September 2006

BRICs foreign ministers

61st UN General Assembly New York, U.S.A.

First meeting of BRICs’ representatives as the “BRIC group”

July 2008 BRICs leaders G8 Summit, Japan Agreement to hold a full-scale summit the following year

June 2009 First BRICs leaders' summit

Yekaterinburg, Russia

"…emerging and developing economies must have greater voice and representation in international financial institutions." (Joint Statement of BRIC Countries' Leaders 2009)8

April 2010 Second BRICs summit Brasilia, Brazil Beginning of intra-BRICs cooperation to strengthen ties at different levels, e.g., business and union representatives and think tanks

March 2011 Third BRICs summit Sanya, China South Africa participates as a guest; officially joins December 2011; acronym became BRICS

5 “Economic Data and Trade Statistics.” Government of Brazil. BRICS. Ministry of External Relations, no date, accessed February 11, 2016, http://brics.itamaraty.gov.br/about-brics/economic-data 6 Oliver Stuenkel. "The Financial Crisis, Contested Legitimacy, and the Genesis of Intra-BRICS Cooperation." Global Governance 19, no. 4 (October 2013): 612. Business Source Complete, EBSCOhost (accessed March 5, 2016). 7 Kevin Gray and Craig N. Murphy. "Introduction: rising powers and the future of global governance." Third World Quarterly 34, no. 2 (March 2013): 184. Business Source Complete, EBSCOhost (accessed 2 March 2016). 8 Stuenkel (2014), 93.

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March 2012 Fourth BRICS summit New Delhi, India Declare intention to study the viability of a BRICS Development Bank; first step toward institutionalizing the BRICS group9

March 2013 Fifth BRICS summit Durban, South Africa Agree to create the New Development Bank.

July 2014 Sixth BRICS summit Fortaleza, Brazil Sign the Agreement establishing the New Development Bank

Literature Review

Taking O’Neill’s article as a milestone, a review of literature from 2001 to early 2016 was undertaken.

From this review, three categories of discussion emerged:

1. BRICS composition and their cohesiveness as a group from economic and/or political perspectives.

2. International financial institutions, their history and governance models, and their ability to

remain relevant in the world’s economy.

3. The BRICS/NDB’s potential impact on global governance.

Despite the BRICS openly discussing launching a development bank since the 2012 summit in New

Delhi,10 few writings regarding the likelihood of the NBD achieving its goals have appeared.

The BRICS as a Collective

Groups such as the G8 share a set of definable characteristics. Early writings on the BRICS included

extensive debate as to whether it ought to be BRICs, BRIC-T (Turkey), or BRICS. With South Africa joining

in 2011 and the BRICS commitment to the NDB, the debate is over. The discussion, however, serves to

demonstrate the uncertainty about shared characteristics and whether it should even be considered a

“group” like the G8. James provides a concise description of three key differences:11

Political systems – Russia and China’s systems are significantly different from the democracies of

South Africa, India, and Brazil.

Demographics – Russia’s population is declining, “aging and sickening;” China and India need to

integrate their poor and poorly-educated “underclass.”

Financial systems – China’s and Russia’s financial systems “lack transparency;” Brazil’s and

India’s are financially underdeveloped.

9 Stuenkel (2014), 96. 10 Stuenkel (2014), 96. 11 Harold James. "The Rise of the BRlCs." International Economy 22, no. 3 (Summer2008 2008): 41. Business Source Complete, EBSCOhost (accessed March 13, 2016).

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Králiková provides a good example of recent thought. In her article, “BRICS: Can a Marriage of

Convenience Last?” she describes the NDB as “the real game changer”12 yet carries on again to discuss

the BRICS’ similarities and differences. Králiková concludes that what the BRICS truly have in common

are significant problems: social inequality, unemployment, corruption and environmental concerns.13

Petropoulos, on the other hand, concludes that despite significant differences in the BRICS’ economies,

there are enough similarities in their political and economic spheres to “provide an acceptable level of

common interests” and that they “share a common goal.”14 In terms of perceived power on the

international stage, for example, each of the five countries is a leader within its respective region. He

anticipates “…major changes in world politics, the most significant of which likely being the increase of

power from emerging nations such as China” and increased recognition that solutions to global

problems require global cooperation. Petropoulos believes that the BRICS “…perceive themselves as

existing outside the current global governance structure to more or less the same extent and have, on

many occasions, confronted the representatives of the old power (the West, in general, and the US, in

particular)”15 and suggests this makes them uniquely capable of leading transformation. He is one of the

few to describe tangible changes achieved by the BRICS, such as participation in discussions aimed at

addressing the 2008 financial crisis.

The descriptions may be accurate, but with the launch of the NDB, miss the mark. It is irrelevant

whether the BRICS are judged as similar enough to be a group. The BRICS are moving forward in a joint

endeavour with collective goals and strategies. Continuing the similar/different debate fails to

acknowledge that the BRICS see themselves as a group. Lingxiao, et.al., make this point well, “The BRICS

countries are banding together in an attempt to rely on their own strength: using their own global

financial resources, they are creating a cohesive nucleus to counteract the functional deficiencies in

existing international financial institutions and are showing a proactive attitude to participating in and

reshaping the New International Economic Order…”16

12 Katarina Králiková. "BRICS: Can a marriage of convenience last?." European View no. 2 (2014): 244. Academic OneFile, EBSCOhost (accessed March 20, 2016). 13 Ibid, 248. 14 Sotiris Petropoulos. "The emergence of the BRICS -- implications for global governance." Journal Of International & Global Studies 4, no. 2 (May 2013): 38-9. Academic Search Complete, EBSCOhost (accessed March 10, 2015). 15 Ibid. 40. 16 T. Lingxiao (1), O. Yao (2), and H. Zexian (3). "The Foundation for the Establishment of the BRICS New Development Bank: Immediate Impetus and Theoretical Rationale." Social Sciences In China 36, no. 4 (October 2, 2015): 41. Scopus®, EBSCOhost (accessed March 3, 2016).

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The Bretton Woods Institutions: Change From Within?

“…the global governance does not reflect these new economic realities. And this new

institution [the NDB] is not going to change everything, I mean, clearly. It’s just a little bit of

movement, but it’s a movement in the right direction, reflecting the new economic and

political realities and reflecting the learning that we’ve done in the last 70 years.”17

Wolff provides a history of the Bretton Woods Institutions from their creation in 1944. He describes

past and current goals, voting structure, and development models. Wolff notes, “Despite the desire of

many countries to institute purely economic criteria in determining how votes would be distributed, the

votes were allocated based on the relative economic importance of member-states to the international

economy.”18 Understanding how these institutions came to be and their evolution is critical if one

wishes to understand the BRICS. Ultimately, Wolff concludes the Bretton Woods Institutions “…due to

their lending policies and governing structures, have restrained true global development. The [Bretton

Woods Institutions] have served as impediments to authentic development and these institutions are in

need of fundamental reform…”19 However, he is clearly not optimistic that substantive change from

within is possible: “…massive changes…are still unlikely” as Wolff’s assessment is that their policies

continue to emanate from “ideals, positions and interests of developed countries.”20

Roukanas and Diamantis approach the BRICS from the perspective of ability and potential to create

change from within the Bretton Woods Institutions. To support their argument, they provide an analysis

of economic data that illustrate growth and change of position relative to developed countries’

economies. Roukanas and Diamantis believe that the BRICS are already playing a much greater role in

the IMF, however the increase in influence does not match their increased contributions to the world

economy.21 Their description of the current state of the World Bank voting processes provides a

pronounced example – the BRICS are represented by a 10% voting share, however their 2010

contribution to the global GDP was 24.3%. The discussion focuses on the BRICS creating change from

within and proposes that change is happening due to their influence but at a much slower pace than

their economic growth22.

Fon Hilmarsson argues the need for change in the Bretton Woods Institutions from the perspective of

economic conditions at their creation compared to current conditions and states, “It is safe to say that

17 J. González, (interviewer), A. Goodman, (interviewer) and J. Stiglitz. “Web Special: Joseph Stiglitz on TPP, Cracking Down on Corporate Tax Dodgers & New BRICS Bank.” Democracynow.org, July 17, 2014, accessed March 18, 2016, http://www.democracynow.org/2014/7/17/web_special_joseph_stiglitz_on_tpp 18 Mark J. Wolff. "Failure of the International Monetary Fund & World Bank to Achieve Integral Development: A Critical Historical Assessment of Bretton Woods Institutions Policies, Structures & Governance." Syracuse Journal of International Law & Commerce 41, no. 1 (Fall2013 2013): 89. Business Source Complete, EBSCOhost (accessed March 9, 2015). 89. 19 Ibid. 76. 20 Ibid. 143. 21 Spyros A. Roukanas and Gabriel V. Diamantis. "BRICs in the global economy under the prism of economic nationalism of IPE." International Journal Of Economic Sciences & Applied Research 7, no. 1 (April 2014): 60. Business Source Complete, EBSCOhost (accessed March 9, 2016). 22 Ibid. 65.

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those two pillars of the postwar economic order were created under circumstances vastly different from

the world we live in today and the original vision under which these institutions were established is

outdated.”23 He suggests the solution is to transfer more power from the G7 to the BRICS and to

revamp the Bretton Woods Institutions to increase participation in decision making processes, as

opposed to creating entirely new institutions. His argument suggests an underlying belief that the BRICS

currently possess enough “power” to effect substantial change within the Bretton Woods Institutions.

Potential and Capacity of BRICS’ Influence

“Perhaps competition from the NDB can pressure the Bretton Woods twins to reduce

voting share discrepancies and soften conditionality, two changes that are long overdue.”24

Gray and Murphy place the rise of BRICS within the context of the 2008 financial crisis suggesting it

“…opened up space for rising powers of the global South to play an increasingly active role in the reform

of global economic and political governance, to the extent that a ‘regime change’ in global governance is

now at least a distinct possibility."25 They view the plan to create the NDB as a strategy to gain a greater

voice and impact in the institutions of economic governance.26 Stuenkel (2014) too positions his

discussion with the 2008 financial crisis. He provides an overview of the BRICS’s activities – the initial

meetings of the BRIC leaders and then finance ministers, leading to the agreement to hold a full scale

summit in 2009. Item three in the first summit’s Joint Statement reads: "…emerging and developing

economies must have greater voice and representation in international financial institutions."27

However, unlike others, Stuenkel focuses his discussion on the broader goals of the BRICS, beyond

promoting change within the Bretton Woods Institutions, to grand change to global governance and the

political power balance. He suggests that part of the intent the language in the joint statement is to

make the transition of power from Europe and the United States toward emerging powers inevitable

and to create a new world order less dependent on the United States.28

Papa (2014), Stuenkel (also 2013), and Epstein (2014) are three of the few authors attempting to

transition the discussion to focus on the BRICS’ potential role and impact. Papa explores the

phenomenon from the point of view of the US “response” to the BRICS. Her research indicates that the

American political and academic spheres persist in viewing the BRICS purely from an economic

perspective. While she does not say as such, her article can be read as a warning to America that more

attention ought to be paid to the BRICS or the U.S. may find itself on the outside of significant change.

Epstein examines the options available to the BRICS, noting that even if their voting shares in the World

23 Hilmar Fon Hilmarsson. "The Bretton Woods Institutions in a Post Crisis World and The Increasing Influence Of Emerging Market Economies." Human Resources: The Main Factor of Regional Development no. 4 (January 2011): 59. Business Source Complete, EBSCOhost (accessed March 21, 2015). 24 Daniel Epstein. "New development: the BRICS Bank and the International System." Harvard International Review no. 2 (2014): 13. Academic OneFile, EBSCOhost (accessed March 11, 2015). 25 Gray & Murphy. 184. 26 Ibid. 27Stuenkel (2014), 93. 28Ibid. 94.

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Figure 1: Factors behind decision to launch BRICS' development bank

Bank and the IMF were increased, “the continued existence of sole veto power for the United States

would limit the utility of this investment. Instead, the BRICS have decided to pursue influence through

the NDB.”29

Shen examines economics and international relations aspects from the Chinese (and the BRICS'

somewhat) perspective. He believes the BRICS have been unsuccessful in change from within30 and

should collectively focus on launching the NDB as the one viable option for developing countries.

Observations such as the NDB “…is the inevitable consequence of the decaying legality of the

international order that was set up predominantly by Western Countries"31 illustrate his perspective.

Shen argues the Bretton Woods Institutions do not meet developing countries’ needs due to lack of

funding for infrastructure projects and the economic and political conditions that are frequently

imposed. Zuma too, addresses the necessity of transformational change: “The outdated ‘zero-sum

game’ paradigm framed in adversarial terms is being recast through progressive groupings such as the

BRICS as an opportunity to strengthen collective global responsibility and achieve developmental gains

for developing countries, and obviously from our perspective, Africa in particular.”32 These two authors

are representative of the BRICS voice: the world is changing and all countries, in particular those

acknowledged as world leaders, would be well-served to recognize and participate in the changes.

The BRICS’ Leaders’ Mindset: Joint Statements, Declarations and Action Plans

Each BRICS summit provided a

concluding statement or

declaration. These documents

summarize shared concerns,

offer appreciation, and provide

common goals for areas the

BRICS wish to address or see

addressed. For this discussion,

relevant declaration items are

those that speak to (1) desired

reforms to international

financial institutions, (2) the

capacity and availability of

existing development funding, and (3) the BRICS’ plans for cooperation. These themes encompass key

economic, political, and historical conditions and factors that combined to create an environment where

BRICS countries would choose to establish a development bank to undertake the same work as existing

29 Epstein, 13. 30 Yi Shen. "BRICS New Development Bank -- Promoting Reform with an All-Win Strategy." China Today 63, no. 10 (October 2014): 45. Academic Search Complete, EBSCOhost (accessed February 2, 2016). 31 Ibid. 32 Jacob Zuma. "South Africa in the BRICS." Harvard International Review 35, no. 2 (Fall2013 2013): 18. Canadian Reference Centre, EBSCOhost (accessed March 14, 2016).

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institutions. The 2008 financial crisis33 provided an opportune moment where the BRICS perceived their

own value to the global economy and governance and an unexpected opportunity to influence or even

alter the global power structure. Within that historical context, the three themes coalesced into the

foundation for the NDB. The following sections trace the evolution of the themes from their first

inclusions in a declaration to announcements of actions intended to address the theme.

Reform of International Financial Institutions

This theme speaks to the BRICS’ ongoing frustration with the lack of proportional representation in

international financial institutions and the lack of progress on reforms intended to rectify the issue. The

Bretton Woods Institutions’ voting structure was conceived during World War Two and reflected

members’ contributions to the global GDP at that time. Minor adjustments have been made, however

the BRICS are not alone in their discontent with the status quo. Item three in the first (2009) summit’s

joint statement speaks to the BRICS’ desire for greater representation of emerging market and

developing countries. Perhaps because this was the first declaration, the tone is positive: “We are

committed to advance the reform…so as to reflect changes in the world economy.”34 The second

summit’s joint statement sees a change in nuance: Item eleven begins, “We will strive to achieve an

ambitious conclusion to the ongoing and long overdue reforms of the Bretton Woods institutions. The

IMF and the World Bank urgently need to address their legitimacy deficits.”35 The item concludes with a

warning, “The international community must deliver a result worthy of the expectations we all share for

these institutions within the agreed timeframe or run the risk of seeing them fade into obsolescence.”36

The message reflects willingness to work toward reform, while the “international community” – which

likely means the United States primarily as well as the rest of the G7 – frustrates the process.

By the third summit (2011), the relevant declaration item (number 11) is brief and terse, appealing for

“a quick achievement of the targets… agreed to at previous G20 Summits…”37 In other words, discussion

is no longer necessary as the changes have been agreed to and simply must be enacted. Summit four

(2012) sees the introduction of negative descriptors in the declaration item (number nine), such as “the

slow pace” and “urgent need.”38 In addition, the IMF is no longer in danger of obsolescence, rather has

already lost credibility: “We will work with the international community to ensure that sufficient

33 It is important to note that the first two summits (2009 and 2010) occurred as the global financial crisis unfolded. As Stuenkel and others rightly observed, the crisis provided an opportunity for the BRICS to play a greater role internationally. The early statements must be understood within that context. 34 “First Summit: Joint Statement of the BRIC Countries Leaders.” Government of Brazil. BRICS. Ministry of External Relations, June 16, 2009, accessed February 11, 2016, http://brics.itamaraty.gov.br/category-english/21-documents/114-first-summit-2 35 “Second Summit: Joint Statement.” Government of Brazil. BRICS. Ministry of External Relations, April 16, 2010, accessed February 11, 2016, http://brics.itamaraty.gov.br/category-english/21-documents/66-second-summit (emphasis added). 36 Ibid. 37 “Third Summit: Sanya Declaration and Action Plan.” Government of Brazil. BRICS. Ministry of External Relations, April 14, 2011, accessed February 11, 2016, http://brics.itamaraty.gov.br/category-english/21-documents/67-third-summit 38 “Fourth Summit: Delhi Declaration and Action Plan.” Government of Brazil. BRICS. Ministry of External Relations, March 29, 2012, accessed February 11, 2016, http://brics.itamaraty.gov.br/category-english/21-documents/68-fourth-summit

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resources can be mobilized to the IMF in a timely manner as the Fund continues its transition to

improve governance and legitimacy.”39

The fifth summit (2013) provides the following analysis and commitment:

“The prevailing global governance architecture is regulated by institutions which were

conceived in circumstances when the international landscape in all its aspects was

characterised by very different challenges and opportunities. As the global economy is

being reshaped, we are committed to exploring new models and approaches towards more

equitable development and inclusive global growth...”40

Item 13 notes the BRICS “remain concerned with the slow pace of the reform of the IMF”41 and continue

to “see an urgent need to implement, as agreed, the 2010 International Monetary Fund (IMF)

Governance and Quota Reform.” The item includes the phrase “with an open mind” in reference to

identification and examination of all options to reform the IMF. Given the negotiations and likely many

drafts of the declaration, the phrase likely was intended to “prod” countries perceived as roadblocks to

the reforms. By the sixth summit (2014), the item appears eighteenth in the declaration and comprises

one blunt sentence: “We remain disappointed and seriously concerned with the current non-

implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on

the IMF’s legitimacy, credibility and effectiveness.”4243 Item eleven in the same declaration announces

the “…signing of the Agreement establishing the New Development Bank.” Fourcade’s observation,

“What united these countries [the BRICS] symbolically, what made them look like a coherent,

meaningful – if completely ad-hoc – group, was also a communality of exclusion: there seemed to be no

place for them in the ideological frameworks and governance structures of the world economy”44 is

particularly apt. If there is no place for the BRICS in existing international financial institutions, then a

solution is to create a structure of their own.

Capacity and Availability of Development Funding

The second theme, development funding, is addressed in the 2009 joint statement within the context of

the impact of the global financial crisis on the “poorest countries,” stating, for example, “The

39 Ibid (emphasis added). 40 “Fifth Summit: eThekwini Declaration and Action Plan.” Government of Brazil. BRICS. Ministry of External Relations, March 27, 2013, accessed February 11, 2016, http://brics.itamaraty.gov.br/category-english/21-documents/69-fifth-summit (emphasis added). 41 Ibid. 42 “Sixth Summit: Fortaleza Declaration and Action Plan.” Government of Brazil. BRICS. Ministry of External Relations, no date, accessed February 11, 2016, http://brics.itamaraty.gov.br/category-english/21-documents/223-sixth-summit-declaration-and-action-plan 43 The 2010 reforms were finally implemented in January 2016. “IMF Governance: Historic Reforms Double Quota Resources and Enhance Voice of Emerging and Developing Economies,” International Monetary Fund, January 27, 2016, accessed March 28, 2016, http://www.imf.org/external/pubs/ft/survey/so/2016/POL012716B.htm 44 Marion Fourcade. "The material and symbolic construction of the BRICs: Reflections inspired by the RIPE Special Issue." Review Of International Political Economy 20, no. 2 (April 2013): 261-2. Publisher Provided Full Text Searching File, EBSCOhost (accessed January 22, 2016).

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international community should also strive to minimize the impact of the crisis on development and

ensure the achievement of the Millennium Development Goals.” (MDGs)45 The 2010 joint statement

includes several items related to development funding, such as item nine which calls for an increase in

development capital and “robust, flexible and agile client-driven support for developing economies from

multilateral development banks.”46 Item 16 states that “commitments regarding the aid to the

developing states, especially those related to the MDGs, should be fulfilled, and there should be no

reduction in development assistance.” The 2010 joint statement also includes a key policy element: “An

inclusive process of growth for the world economy is not only a matter of solidarity but also an issue of

strategic importance for global political and economic stability.”47 This sentence can be read as a frank

assessment of future global economic growth and opportunity: stability and growth will only happen if

there is real change and true cooperation.

The 2011 declaration does not include items specific to development funding. Rather, development as a

topic appears within a number of items. For example, item 17 calls on the “international

community…to…increase support to the developing countries in terms of funding and technologies”48

and item 23 speaks to BRICS’ cooperation regarding sustainable development to “…achieve positive and

practical results in areas of economic growth, social development and environmental protection under

the framework of sustainable development.”49 The fourth summit’s declaration (2012) sees a change in

tone with regards to development funding: “we recognise that there is a pressing need for enhancing

the flow of development finance to emerging and developing countries.”50 This declaration also

includes the first reference to the possibility of the NDB. Item 13 states:

“We have considered the possibility of setting up a new Development Bank for mobilizing

resources for infrastructure and sustainable development projects in BRICS and other

emerging economies and developing countries, to supplement the existing efforts of

multilateral and regional financial institutions for global growth and development. We

direct our Finance Ministers to examine the feasibility and viability of such an initiative, set

up a joint working group for further study, and report back to us by the next Summit.”51

While the key content of this item is certainly the move toward establishing the NDB, it is also

noteworthy relative to development funding as it continues the message that existing development

funding/institutions are insufficient. Item nine in the 2013 declaration provides a blunt assessment of

development capacity, stating, “Developing countries face challenges of infrastructure development due

to insufficient long-term financing and foreign direct investment, especially investment in capital

45 “First Summit: Joint Statement of the BRIC Countries Leaders.” 46 “Second Summit: Joint Statement.” 47 Ibid. 48 “Third Summit: Sanya Declaration and Action Plan.” 49 Ibid. 50 “Fourth Summit: Delhi Declaration and Action Plan.” 51 Ibid.

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stock.”52 This item carries on to provide the results of the Finance Ministers’ feasibility study: “…we are

satisfied that the establishment of a New Development Bank is feasible and viable. We have agreed to

establish the New Development Bank. The initial contribution to the Bank should be substantial and

sufficient for the Bank to be effective in financing infrastructure.”53

Item 11 in the 2014 declaration, which announces the signing of agreement to establish the NDB, begins

“BRICS, as well as other EMDCs, continue to face significant financing constraints to address

infrastructure gaps and sustainable development needs. With this in mind, we are pleased to announce

the signing of the Agreement establishing the New Development Bank (NDB), with the purpose of

mobilizing resources for infrastructure and sustainable development projects in BRICS and other

emerging and developing economies.”54 With that, the BRICS consolidate their position that access to

development funding is critical and existing capacity/institutions are insufficient. The BRICS are no

longer willing to wait for the G7 or International financial institutions to change to meet the current

situation; instead they will fill the gap themselves.

BRICS’ Cooperation

The final theme, cooperation among the BRICS, evolves with each summit and as joint work is

undertaken. In 2009, the BRICs are beginning to coalesce and to test their capacity for influence. Item

15 illustrates initial efforts: “We have agreed upon steps to promote dialogue and cooperation among

our countries in an incremental, proactive, pragmatic, open and transparent way...dialogue and

cooperation…is conducive not only to serving common interests of emerging market economies and

developing countries, but also to building a harmonious world of lasting peace and common

prosperity.”55 The second summit’s (2010) statement describes benefits of cooperation and next steps

to “promote dialogue and cooperation among our countries in an incremental, proactive, pragmatic,

open and transparent way.”56 This statement also includes a list of initiatives “aimed at strengthening

cooperation”57 including ongoing meetings of Ministers of Finance and Governors of Central Banks.

The third summit’s declaration (2011) sees a shift from what is hoped for to what is occurring. Item six

states, “In the economic, financial and development fields, BRICS serves as a major platform for dialogue

and cooperation.”58 This item commits the BRICS to “continue strengthening the BRICS partnership for

common development and advance BRICS cooperation in a gradual and pragmatic manner.”59 This

declaration also includes a list of collaborative initiatives including strengthening financial cooperation

among the BRICS Development Banks. Interestingly, this item also states that, “We reiterate that such

cooperation is inclusive and non-confrontational. We are open to increasing engagement and

52 “Fifth Summit: eThekwini Declaration and Action Plan.” 53 Ibid. 54 Ibid. 55 “First Summit: Joint Statement of the BRIC Countries Leaders.” 56 “Second Summit: Joint Statement.” 57 Ibid. 58 “Third Summit: Sanya Declaration and Action Plan.” 59 Ibid.

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cooperation with non-BRICS countries, in particular emerging and developing countries, and relevant

international and regional organizations.”60

The opening item of the fourth summit’s (2012) declaration articulates the BRICS’ sense of “group” and

the benefits perceived/received from the relationship:

“We, the leaders of the Federative Republic of Brazil, the Russian Federation, the Republic

of India, the People's Republic of China and the Republic of South Africa, met in New Delhi,

India, on 29 March 2012 at the Fourth BRICS Summit. Our discussions, under the

overarching theme, "BRICS Partnership for Global Stability, Security and Prosperity", were

conducted in an atmosphere of cordiality and warmth and inspired by a shared desire to

further strengthen our partnership for common development and take our cooperation

forward on the basis of openness, solidarity, mutual understanding and trust.”61

This item ought to have put to rest any remaining uncertainty about the BRICS’ cohesiveness. The

summit’s theme alone makes clear the group’s self-perception and future intentions. Should this still be

considered insufficient to accept that the BRICS see themselves as a “force to be reckoned with,” item

two in the fifth summit’s (2013) declaration provides indisputable evidence: “We aim at progressively

developing BRICS into a full-fledged mechanism of current and long-term coordination on a wide range

of key issues of the world economy and politics.”62 Finally, in the sixth summit’s declaration (2014), the

tone shifts from “we could” to “we are.” Item two states, “…our coordination is well established in

various multilateral and plurilateral initiatives and intra-BRICS cooperation is expanding to encompass

new areas. Our shared views and commitment to international law and to multilateralism…are widely

recognized and constitute a major contribution to global peace, economic stability, social inclusion,

equality, sustainable development and mutually beneficial cooperation with all countries.”63

As discussed in the literature review, while opinions differ as to whether the BRICS are a cohesive group,

this debate is largely moot. Even the recent economic and political sanctions against Russia seem to

have had little impact on BRICS cooperation and future plans. The first set of sanctions were announced

in March 2014.64 The sixth summit took place in July 2014 under the theme of “Inclusive Growth:

Sustainable Solutions.” Item four in the declaration states: “we pledge to deepen our partnership with

a renewed vision, based on openness, inclusiveness and mutually beneficial cooperation.”65 Item 20

commits the BRICS to “raise our economic cooperation to a qualitatively new level.”66 The only item

that does not reinforce the image of cooperation is item 27. Read within the context of the situation in

Ukraine, the item results in more questions than answers:

60 Ibid. 61 “Fourth Summit: Delhi Declaration and Action Plan.” 62 “Fifth Summit: eThekwini Declaration and Action Plan.” 63 “Sixth Summit: Fortaleza Declaration and Action Plan.” 64 U.S. Department of State: Diplomacy in Action. (No date.). Ukraine and Russia Sanctions. Retrieved from: http://www.state.gov/e/eb/tfs/spi/ukrainerussia/index.htm 65 “Sixth Summit: Fortaleza Declaration and Action Plan.” 66 Ibid.

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“We will continue our joint efforts in coordinating positions and acting on shared interests

on global peace and security issues for the common well-being of humanity. We stress our

commitment to the sustainable and peaceful settlement of disputes, according to the

principles and purposes of the UN Charter. We condemn unilateral military interventions

and economic sanctions in violation of international law and universally recognized norms

of international relations. Bearing this in mind, we emphasize the unique importance of the

indivisible nature of security, and that no State should strengthen its security at the

expense of the security of others.”67

Is Russian military intervention in Ukraine being condemned? Are the American, European Union, and

others’ sanctions the target? Or both? Only participants in the negotiation and writing of this item

know for certain. Item 44 offers the only specific discussion of Ukraine: “We express our deep concern

with the situation in Ukraine. We call for a comprehensive dialogue, the de-escalation of the conflict and

restraint from all the actors involved, with a view to finding a peaceful political solution, in full

compliance with the UN Charter and universally recognized human rights and fundamental freedoms.”68

It would be easy to read item 44 as pressure from Brazil, India, South Africa, and China; however, it

simply doesn’t offer sufficient information to warrant any conclusion. Including the item in the

declaration reveals only that the Ukraine situation could not be ignored.

While the seventh summit (2015) is beyond the scope of this case study, it is noteworthy that the

declaration’s opening item clearly states the intention to continue to cooperate. The summit was “held

under the theme ‘BRICS Partnership – a Powerful Factor of Global Development’.”69 This item states,

“We discussed issues of common interest in respect of the international agenda as well

as key priorities in respect of further strengthening and broadening our intra-BRICS

cooperation. We emphasized the importance to strengthen BRICS solidarity and

cooperation, and decided to further enhance our strategic partnership on the basis of

principles of openness, solidarity, equality and mutual understanding, inclusiveness and

mutually beneficial cooperation.”70

Of the three themes explored above, the first two, desired reforms to International financial institutions

and the capacity and availability of existing development funding, are the building blocks upon which

BRICS’ cooperation is built. The NDB would not exist without the snail’s pace of international financial

institution reform or the difficulty emerging market and developing countries face accessing

development funding. As the BRICS’ economies grew, and then weathered the global financial crisis, it

became clear that a significant opportunity existed. Through an odd coincidence of fate – O’Neill’s

67 Ibid. 68 Ibid. 69 “VII BRICS Summit – Ufa Declaration.” Government of Brazil. BRICS. Ministry of External Relations, July 9, 2015, accessed February 11, 2016, http://brics.itamaraty.gov.br/category-english/21-documents/253-vii-brics-summit-ufa-declaration 70 Ibid. Emphasis added.

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article and the subsequent discussion71 – these countries looked to each other and wondered at the

potential for cooperation. Starting small, with a meeting of finance ministers in 2006, the BRICS have

grown into an international presence in a decade. Cooperation began and then grew with success. As

the cliché goes, success breeds success. IMF reforms were finally implemented in January 2016 and

numerous collaborative initiatives are underway under the BRICS banner.

The BRICS’ View of a “Harmonious World”

It is worthwhile to take a moment to consider the BRICS’ vision of a better world and how that vision

might be achieved. As noted earlier, item 15 in the first summit’s joint statement ascribes the following

benefit to BRICS’ collaboration: “…The dialogue and cooperation of the BRIC countries is conducive… to

building a harmonious world of lasting peace and common prosperity.”72 Tangible direction as to how

the BRICS plan to achieve that goal, however, is not provided. The statement references food security,

energy efficiency, and sustainable development, but only in high-level terms. The second (2010)

summit’s statement includes item 18, a “call upon the international community to make all the

necessary efforts to fight poverty, social exclusion and inequality…[to achieve] sustainable social

development, with social protection, full employment, and decent work policies and programmes,”73

but no concrete actions are included. This pattern is repeated in the remaining declarations.

Both the third and fourth summit’s declarations contain items regarding the importance of “Accelerating

growth and sustainable development,” and “eradicating poverty, combating hunger.”74 The fourth

summit’s declaration includes one of the few sentences that could read as a strategy: “Creating jobs

needed to improve people's living standards worldwide is critical...”75 Actions to create jobs are not

included. The fifth summit’s (2013) declaration repeats language from the first (2009) joint statement:

“We are committed to building a harmonious world of lasting peace and common prosperity…”76 Once

again, specific targets or objectives are not provided. Finally, the sixth summit’s declaration sees an

interesting shift. Item 6 reads as taking credit for improvements: “The BRICS continue to contribute

significantly to global growth and to the reduction of poverty in our own and other countries. Our

economic growth and social inclusion policies have helped to stabilize global economy, to foster the

creation of jobs, to reduce poverty, and to combat inequality…”77 The details as to how these

progressive elements are or was accomplished are not included.

Unlike the three themes leading to the launch of the NDB, “achieving a harmonious world” does not

develop over subsequent declarations. Over six years, frustration with the lack of progress in reforming

international financial institutions grows, the sense of urgency regarding the need for development

71 It would be interesting to see if there is any research exploring whether the BRICS would likely have become a group, had O’Neill and then others not begun the discussion. 72 “First Summit: Joint Statement of the BRIC Countries Leaders,” (emphasis added). 73 “Second Summit: Joint Statement.” 74 “Fourth Summit: Delhi Declaration and Action Plan.” 75 Ibid. 76 “Fifth Summit: eThekwini Declaration and Action Plan” (emphasis added). 77 “Sixth Summit: Fortaleza Declaration and Action Plan.”

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funding increases, and cooperation among the BRICS solidifies and deepens. Core issues such as food

security or equality remain a constant presence in declarations, but only as broad concerns and

overarching goals. Tangible actions are not identified.

A New Development Bank

An organization with the same purpose as the International financial institutions but with a new

approach to development funding and non-Western countries at the helm is now a reality. The NDB

intends to be an inclusive development bank. Its leadership composition and location, for example,

demonstrate this: “The first chair of the Board of Governors shall be from Russia. The first chair of the

Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The

headquarters of the Bank shall be located in Shanghai.”78 The BRICS also intend the NDB to change how

development funding is managed and perceived. Petropoulos explains that “If aid from China and other

emerging powers can be understood to be an attractive alternative to the aid provided by the US, it

would decrease the long-term ability of the Western world to enforce unwanted economic conditions

and reforms and would strengthen the relative influence of emerging powers such as China and

Brazil.”79 Shen observes that the NDB’s launch allows developing countries to focus on infrastructure

projects: "...the World Bank is unable to give assistance thoroughly. Besides, the economic and political

conditions imposed are hard to accept as most applicant countries have learned hard lessons."80

Those “hard lessons” are explained by Wolff who describes the economic paradigm guiding the western

approach to providing funds to developing countries, the Washington Consensus. This is the consensus

between the IMF, the World Bank, and the U.S. Treasury about the right policies for developing

countries: 81 “The discord between loan conditionality and development objectives is rooted in the IMF

and World Bank's governance structure permitting dominant shareholders to utilize conditionality as a

means of furthering their own global economic and political agendas."82 The NDB allows the BRICS to

provide infrastructure and other development funding in a manner they believe to be more effective for

emerging market and developing countries than the International financial institutions. In their recent

evaluation of the BRICS’ objectives behind launching the NDB, Qobo and Soko contend,

“The BRICS countries have realised that it makes little sense to depend on the largesse of

advanced industrial economies that have a vested political interest in maintaining the

status quo. They have thus formed their own development bank as a way to indirectly push

for reforms in global financial institutions; the bank serves as a mechanism for drawing

resources outside of the framework of existing International financial institutions – notably

78 Ibid. 79 Petropoulos, Sotiris. "The emergence of the BRICS -- implications for global governance." Journal Of International & Global Studies 4, no. 2 (May 2013): 46. Academic Search Complete, EBSCOhost (accessed March 10, 2015). 80 Shen, 46. 81 Wolff, 94. 82 Ibid, 106-7.

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the IMF and the World Bank – in order meet infrastructure needs and address sustainable

development challenges.”83

They believe the BRICS are working toward three key “outcomes:” addressing significant gaps in

infrastructure that impact the BRICS and other developing countries; building “bargaining capacity”

when dealing with the west through increased collaboration with developing countries and emerging

economies; and increasing the BRICS’ ability to set the agenda and create “new rules and norms” in

international processes.84 These outcomes parallel the themes identified in this paper.

With the NDB commencing operations in early 2016, it will be some time before success can be

evaluated. At this point, however, the success achieved simply by launching the bank cannot be

overlooked. For 60 years, the Bretton Woods Institutions have been “the only game in town.” For two

decades or more, the BRICS and others have been unsuccessfully pushing for reasonable reforms. A

paradigm shift in global governance has occurred: the BRICS have concluded that it is no longer

necessary to always work with the West. If what the West offers isn’t working, then the BRICS will

simply create a structure of their own.

83 M. Qobo (1) and M. Soko (2). "The rise of emerging powers in the global development finance architecture: The case of the BRICS and the New Development Bank." South African Journal Of International Affairs 22, no. 3 (July 3, 2015): 277-288. Scopus®, EBSCOhost (accessed March 3, 2016).279. 84 Ibid. 281.

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Glossary of Terms and Acronyms

Asia Infrastructure Investment Bank (AIIB)

Announced in 2013 and opened in January 2016, the AIIB, focuses “…on the development of infrastructure and other productive sectors in Asia…” The 57 founding members include the BRICS and G8 members France, Germany, Italy and the United Kingdom.85

Bretton Woods Institutions (BWIs)

The World Bank and International Monetary Fund (IMF) were created at the end of World War II to support rebuilding in countries devastated by the war. Both institutions have evolved beyond that goal to become key players in global development.

BRIC Brazil, Russia, India, and China. The initial grouping identified by Jim O’Neill in 2001, focused on economic growth and potential for inclusion in the G7.

BRICS Brazil, Russia, India, China, and South Africa. The current grouping of countries and the partners in the New Development Bank.

Development bank Global institutions such as the World Bank and International Monetary Fund (IMF) that provide funds and resources to support development in emerging economies.

EMDCs Emerging market and developing countries

IFIs International financial institutions such as the IMF and World Bank

IMF International Monetary Fund

New Development Bank (NDB)

The development bank announced by the BRICS “…with the purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies.”86

85 “AIIB: About Us,” Asian Infrastructure Investment Bank, no date, accessed March 5, 2016,

http://euweb.aiib.org/html/aboutus/introduction/aiib/?show=0 86 “VII BRICS Summit – Ufa Declaration.” Government of Brazil. BRICS. Ministry of External Relations, July 9, 2015, accessed

February 11, 2016, http://brics.itamaraty.gov.br/category-english/21-documents/253-vii-brics-summit-ufa-declaration

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