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BRICS and the Building of Financial Great Wall

Update: April 3, 2022 – 12:37 AM Pacific Time

Originally published at LinkedIn on August 31, 2015:

Said El Mansour Cherkaoui Invited by the China Government. Visit organized by China Authorities to the Great Wall on the Date of my Birthday – The Great Wall the Second Place of my Reincarnation and Rebirth

Building New Economic World Powerhouses on BRICS and MINT

Said El Mansour Cherkaoui, Ph.D. ★ Published on July 1, 2015 – 78 articles published at LinkedIn

Great Wall and Great Break Banking Time for BRICS

Updated on April 2. 2022

This article is another confirmation of my warning and writing on what is going to be faced as spiral and trendy inflationary curbes not just by the European Central Bank but by the entire world financial institutions and their respective countries and economies.

European Central Bank President Christine Lagarde said earlier the week of 4/3/2022 that “three main factors are likely to take inflation higher” going forward.

“Energy prices are expected to stay higher for longer,” “pressure on food inflation is likely to increase,” and “global manufacturing bottlenecks are likely to persist in certain sectors.”

“Households are becoming more pessimistic and could cut back on spending,” Lagarde said in a speech in Cyprus on Wednesday March 30. 2022.

“Soaring energy costs sparked by the war in Ukraine have caused a surge in consumer prices within the eurozone, the EU’s statistics agency said on Friday 4/1/2022. Annual inflation in the eurozone reached 7.5% in March, up from 5.9% in February, Eurostat reported. It is the fifth straight month that inflation in the eurozone has set a record. Energy prices increased 44.7% in March, up from 32% in February, according to the Eurostat, as the European Union [European Commission] found itself embroiled in an oil-and-gas crunch caused by tensions with Russia following the invasion of Ukraine. The rise in inflation is increasing pressure on the European Central Bank to raise its key interest rate.

Here we go at last recognized the failure of her own policy:

European Central Bank President Christine Lagarde warned Wednesday 30 March, 2022 that a prolonged Ukraine conflict will mean the cost of living will continue to soar, hampering hopes of a post-COVID recovery.”

The Inflation is here and will endure with Russia Requesting the use of Rubles in all international purchases and China will follow this course and next is India. It is just a matter of time that BRICS Development Bank will advance its pawn toward becoming a global player in the international finance space with no borders like all these western based international financial institutions.

Currently the and what Ms. Presidente Christine Lagarde is pursuing “Monetarist Policy” added to the reasons of the Russian invasion of Ukraine and the subsequent sanctions are all playing in the field of the rise and consolidation of alternative and parallel financial institution coming from emerging economies and their followers. Whatever the importance of these reactions, there a disruptive impact and dispersion as well as diversion of financial transactions that are going to change the international financial system and all the related regional banks not only as regulator of the market but more importantly as a hub of all the financial transactions related to international trade and the value of goods exchanged.

Russia★China & Europe★USA

Russia wants “unfriendly countries” to pay for Russian natural gas in rubles. That’s a new directive from President Vladimir Putin as he attempts to leverage his country’s in-demand resources to counter a barrage of Western sanctions. “I have decided to implement … a series of measures to switch payments — we’ll start with that —…Continue Reading →

Russia’s invasion of its neighbor and the sanctions that followed have meant spiraling energy costs across the EU. Inflation in Germany is at its highest since reunification in 1990.

These are numbers that any Media outlet can verify by having their own estimates and calculations.

Euro zone inflation hits another record high of 7.5% as Russia-Ukraine war pushes up energy prices

Eurozone: Money and Inflation

Publications by Said El Mansour Cherkaoui on Related Topics Some of my publications related to the topic addressed by Presidente Christine Lagarde can be used as complement for my aforementioned comment while presenting the role of the World Bank and the International Monetary Fund in shaping the evolution of the World Economy with emphasis on…Continue Reading →

Eurozone: Monnaie et Inflation

European Central Bank Débat sur la Monnaie: Economie Politique ou Politique Economique Said El Mansour Cherkaoui 25/9/19 Oakland USA Sciences Po, Grenoble Institut des Hautes Etudes de l’Amérique Latine, Paris Université de la Sorbonne, Paris III Publié par Said El Mansour Cherkaouiavril 28, 2020 Publié dans Cours en Ligne, Développement Economique, Programme de Formation Étiquettes :Cours en Ligne, Développement Economique, Programme…Continue Reading →

Brazil, Russia, India, China and South Africa

From July 2014 to July 2015, the BRICS group, the new emerging economies of Brazil, Russia, India, China and South Africa signed a Memorandum of Understanding to create a new international financial institution capitalized with $200 billion of liquidity. This banking organization was projected to act as BRICS Development Bank with $100 billion along with a reserve currency pool worth over another $100 billion. 

On July 2015, in China, the New Development bank, also known as the BRICS Bank, has been approved by the Standing Committee of the National People’s Congress during its meetings that are actually taking place until July 1, 2015. India and Russia had already agreed on this creation and South Africa is expected to present ratification documents in July during a meeting of BRICS countries in the Russian city of Ufa.

The BRICS Factory of Growth Adjustment, Monetary Balance and Eco-social Development

In terms of demographic and economic standards, the BRICS are becoming heavy weights challengers for the New World Order inherited from the Presidency of Father Bush. The group BRICS has 42 percent of the world’s population and roughly 20 percent of the world’s economy based on gross domestic product, and 30 percent of the world’s GDP based on purchasing power parity. * The total trade between the BRICS’ countries is $6.14 trillion, or nearly 17 percent of the world’s total. They also account for 11 percent of global capital investment. China, India and Brazil are also ranked among the largest economies in the world with more than $2 trillion, €1.25 trillion by nominal GDP.

In 2015, the members of this privileged “Elite” club were the United States, China, Japan, Germany, France, the United Kingdom and India. Their ranking in respect to respective GDP in trillions of U.S. dollars is the following:

USA $18.1 – China $11.2 – Japan $4.2 – Germany $3.4 – U.K. $2.9 – France $2.5 – India $2.3 – Brazil $1.9 – Italy $1.8 – Canada $1.6.

The Structure of the New BRICS Development Bank

Each member of the BRICS will have a seat for their Finance Minister or Central Bank Chair at the Bank’s Representative Board. The other innovation is that membership is not just limited to BRICS economies such is the case in other international financial institutions. The BRICS Bank will be headquartered in Shanghai, with India presiding it during the first year, and Russia serving as the chairman of the representatives. During the BRICS and the Shanghai Cooperation Organization (SCO) summits in the Russian city of Ufa, Anton Siluanov has been appointed Board Chairman of the New Development Bank, he is the current Russian Finance Minister. Similarly, it has been agreed that an African regional center of the NDB bank will be established in South Africa.

In recent interview conducted by RT, the New Development Bank president Kundapur Vaman Kamath declared a “significant part” of the bank’s activity could be carried out in local currencies. “I have not applied my mind as to what effect it will have on other currencies. But as far as our local currencies are concerned, our own countries are concerned, that will substantially reduce any exchange risk.” He also projected that by April 2016 the New Development Bank will issue its first loan. 

Mr. Kamath added: “I think clearly setting up of this bank is also a signal that developing countries are now able to stand on their feet in their own way and set up their own institutions. We are really looking at expanding the membership base in the future.” In this perspective, joining the Development Bank remains open to other emerging countries, such as Mexico, Indonesia, or Argentina, once it sorts out its debt burden.

The initial funding came from each BRICS member that will contribute an equal share in establishing a startup capital of $50 billion while the full participation is $100 billion. This capitalization represents a crisis lending fund and is called the Contingent Reserve Arrangement (CRA). China contributed with $41 billion while Russia, Brazil and India will add in $18 billion, and South Africa, the newest member, will contribute $5 billion. The contribution of 39.5 percent will give China the largest voting rights.

On the 7/9/2015, Russian President Vladimir Putin is meeting BRICS leaders in an expanded format at the BRICS and the Shanghai Cooperation Organization (SCO) summits in the Russian city of Ufa which took place on July 8-10, 2015. The Summit in the Russian City of Ufa become the craddle for the official launch of the New Development Bank and the designation of its leaders. in the same perspective, the BRICS countries agreed to put in place a $100bn reserve currency pool which aims to protect the member states – the emerging economies of Brazil, Russia, India, China and South Africa – from currency volatility shocks. This is one of the reasons, the summits agreed that the association will start using their local currencies for mutual settlements quite soon. 

In fact, the continuity of the financial imbalances of the western economies added to the unpredictability of their financial institutions and their budgetary deficits had added more concerns to the BRICS members and have motivated them to sustain the creation of the New Development Bank, an alternative and a supplement to existing international “hard currency” financial institutions. 

The New Alternative to the Union of Western Banks 

The idea behind these financial moves is to create structures that will help to lessen dependency on the West and to create a more multi-polar world. Other implications are a design to protect against the instability and the fluctuations of the Western based currencies. The BRICS BANK is sought to provide also financial means and resources to counter the influence of Western-based lending institutions and the US Dollar, especially at the wake of the current financial turmoil traversing the western economies and the regional conflicts generated by the consequent race for the natural resources around the globe.

Within such frame, the long domination of the US Dollar since the signing of Bretton Woods Agreement and the Nixon Administration’s creation of the Petro-dollars (1973 oil crisis) are starting to show some fissures and weakness in the resolution, remittance and refinancing of international transactions. 

The implications of all these new forms of competitiveness at the level of financial transactions and their far-reaching impact on the balance of payments, especially the current accounts of the countries concerned, it is without equivoque that new currencies are going to be emerging within certain trading blocs before to reach an international acceptance. The establishment of these regional banking institutions that aim to be a global player are the first signs of such move.

Additional Notes for Clarification 

N.B.: * The aforementioned indicators are reflective of tendencies and not realities of economic situations and social conditions. For this reason, they have to be considered as reflective of selective and comparative performances given the fact that the world economy can be defined, estimated, evaluated, but also can be expressed in various other forms and indications. “It is unclear, for example, how many of the world’s 7.13 billion people have most of their economic activity reflected in these [aforementioned] valuations.”

Published by

Said El Mansour Cherkaoui, Ph.D. ★ Consultant ★ International Supply Chain ★ Organizational Management ★ Entrepreneurial Planning ★ United … See More

Dr. Said El Mansour Cherkaoui invited by the Government of China to provide training to executives, officials and entrepreneurs

Dr. Said El Mansour Cherkaoui invited by the Government of China to provide training to executives, officials and entrepreneurs ★ Consultant ★ International Supply Chain ★ Organizational Management ★ Entrepreneurial Planning ★ United States of America ★ France ★ Morocco ★ China ★ Sub-Saharan Africa ★

Published • 6 years ago – on July 1, 2015

Any comment can be directly addressed to Dr. Said El Mansour Cherkaoui:

African Enterprise – AIEA, GlobalLeverage, American Institute of Management – AIM @ Oakland by Dr. Said El Mansour Cherkaoui is licensed under a Creative Commons Attribution-Non Commercial 4.0 International License.

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