The multipolar contestation of BRICS development financing, by Petras Shelton-Zumpano

The first BRICS Summit was held in 2009, shortly after the start of the ongoing global financial crisis. The timing was not accidental. Niu (2012) highlighted that one of the core concerns of the BRICS group since its inception has been the mitigation of international financial risks. For many of the emerging or new growth economies this entails a revision of the current world monetary system. Towards this end, cooperation in the BRICS forum has contributed to align the five national interests in international financial institutions. It has also fostered a list of projects including a development bank, a joint reserves pool and an interbank cooperation mechanism that provides local currency credit facilities, reducing business transaction costs.

Stern and Romani (2012) argue that the BRICS Bank could absorb project risks, promote economies of scale, stabilise government behaviour, and join sovereign wealth with private sector investments. According to UNCTAD statistics, the BRICS together had invested abroad $1.1 trillion by 2011, more than twice the volume of five years earlier. Although their global outward FDI stocks only account for 5% of the world total, this is changing fast. The BRICS Bank would help accelerate outward investment flows, particularly between the five members.

BRICS institutions can reduce in some respects reliance on Bretton Woods equivalents, indirectly shifting the status quo of global economic governance. By strengthening and internationalising their own currencies, the emerging powers could reduce their exposure to the risks associated with the dollar and other major convertible currencies, including some of those mentioned by the Brazilian Finance Minister Mantega in “currency wars” speeches. The new institutions are also strategic statements that promote structural global governance reform, drawing attention to insufficient representation of emerging and emerged economies in international financial institutions. The long wait for approval of IMF quota reforms, particularly by US Congress, has stimulated the search for alternatives.

Quah (2011) forecasted that the world’s economic centre of gravity, “the average location of the planet’s economic activity measured by GDP across 700 locations”, will shift to a location between India and China around 2050. In 1980 it was located in the middle of the North Atlantic. The intensification of BRICS cooperation follows the shifting economic centre of gravity and strengthens each member’s profile as a regional financial power. The emerging powers’ increasing economic internationalisation promotes multipolarity in the international system, which has become an official foreign policy orientation for at least one of the members, Brazil (Brics Policy Centre, 2012). In India, the statesman Tharoor (2012) beckoned his government to move beyond the Non-Aligned Movement towards a foreign policy of “multi-alignment”.

In addition to economic growth, pressure to reform the IMF and the promotion of multipolarity, a fourth likely consequence of launching BRICS institutions is change in the distribution of development beliefs, identities and practices among policy makers, opinion formers and staff of international financial institutions. From a constructivist point of view, this is perhaps the most interesting of the four effects. The BRICS will help spread alternative lending models, and eventually perhaps offer a new policy paradigm. O’Neill (2011) emphasises that Chinese policy makers’ thoughts on intervention and preferences for the global monetary future differ from current orthodoxy in the G7.

According to Babb (2012), the transnational Washington Consensus policy paradigm was weakened by the custom of making loans conditional on policy reform. Mwase & Yang (2012) claim that the principles of BRICS development financing differ from those of the OECD Development Assistance Committee (DAC) framework in three main ways. First, they are based on a mutual benefits model derived from South-South cooperation practices. Second, they tend to finance projects without policy conditionality. Third, they focus more on micro-sustainability of debt for each individual project rather than on long-term debt sustainability and macroeconomic factors.

Despite the emergence of new powers, the world order remains asymmetrical (Renard, 2009), and unorthodox economic ideologies are not dominant. Most G7 governments retain the greatest weight in global economic decision making processes. Even if IMF quota reforms were approved, the BRICS would still only have 14.1% of voting shares compared to 41.2% held by the G7. Moreover, there are limitations to BRICS coordination, for example, the group was unable to put forward a joint candidate for World Bank president (Emerson, 2012). The members’ regional environments can also limit coordination.

The “emerged” regional powers are subject to contestation within their local geographies. Flemes & Wehner (2012) argue that Brazil’s relatively low level of multilateral leadership in South America and limited willingness to bear the brunt of funding integration are sources of contestation from neighbours. Other BRICS have very complicated relations with neighbours. Closer alignment of BRICS interests could be perceived by regional secondary powers as being in detriment of regional alliances. The extension of benefits from BRICS development finance cooperation to regional neighbours has the potential to limit contestation from these secondary powers and facilitate cooperation.


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Petras Shelton-Zumpano is a PhD Candidate in Political Science at Xiamen University, China (

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