The New Development Bank (NDB) set up by the BRICS countries — Brazil, Russia, India, China and South Africa — will help break the stranglehold of the U.S. dollar on global trade, a Brazilian expert has said.
“The establishment of the NDB is part of a desire to help crisis-hit countries without having to go to the World Bank or the IMF (International Monetary Fund),” Bruno Martarello de Conti, an economics professor and BRICS expert at the State University of Campinas in Sao Paulo, said in a recent interview with Xinhua.
On July 21, 2015, the NDB officially opened in Shanghai with its main focus on projects in infrastructure and sustainable development.
“The multilateral institutions set up after World War II were all centered around the U.S. dollar. The IMF lends loans in the U.S. dollar and they have to be paid back in the same currency. About 80 percent to 90 percent of international trade is denominated in the U.S. dollar,” the expert said.
“Therefore, the BRICS and the NDB can try and make operations in their own currencies, such as the renminbi or the real. It will foster the use of other currencies, which is important for the international monetary system,” he added.
Another interesting aspect is that the BRICS nations are ready to share some of their international reserves to help each other out at difficult moments, said Martarello de Conti, referring to the Contingent Reserve Arrangement, a reserve pool worth 100 billion dollars to be set aside for liquidity measures and crisis protection.
“When one of them is in crisis, they will have access to these reserves instead of seeking credit from the IMF, which imposes many constraints. We can set our own criteria for sharing these reserves, without depending on the IMF,” he said.
The NDB’s potential, the expert said, is not limited to the five BRICS countries. “The idea is to invite other countries in Latin America, Africa and even Greece to join the NDB. All the periphery countries can see the NDB as an important source of funds, in parallel of the World Bank.”
Besides, closer BRICS collaboration can bring its member countries closer together, Martarello de Conti said, citing the example of the China-Brazil cooperation.
“Chinese investment is very important for Brazil as it can be a source of demand for our economy to rebound,” he said, urging the two countries to work together on infrastructure.
“For example, China imports many soybeans from Brazil, but crops are mostly in the central-western states of Goias or Mato Grosso, states that are far from the shore. For the soybeans to get to the ports, they travel a long way by truck, making them even more expensive for the Chinese,” he said.
“Constructing a railway would be good for both Brazil and China, as imports would be at a lower cost,” he added.
Martarello de Conti said that the NDB can be a source of important funding for infrastructure in Brazil, saying that “we have the Brazilian Development Bank, which is important but has its limits. The NDB can be important for our development.”