2015. vol. 10. No. 2

The article addresses the puzzle of how the BRICS members are able to overcome institutional constraints and make progressin establishing the New Development Bank (NDB) in a short period of time from its conception. It argues that the club dynamicsamong the members help circumvent intra-BRICS conflict due to the embedded mutual common interest in statusattribution. Club dynamics also create an informal institutional platform for them to manoeuvre through intra-BRICS competitiveinterests by taking a symbolic stake in the bank’s development. Club diplomacy also downplays contentious issueswhile elevates and reinforces the issues of their common interest. Such an approach is tested, however, when the focus shiftsfrom externalized demands to collective action as a small group. Calls for reform in the global system notably through a moreequitable distribution of voice and influence in the international financial institutions (International Monetary Fund andthe World Bank) further consolidated the club-like culture among BRICS members. At the same time, the push for a boldinitiative of their own, such as the establishment of the NDB with the promise of massive infrastructure investment targetedat other countries in the global South, demonstrates the symbolic need to move beyond the status quo.

The article explores whether the interstate dynamics of the BRICS can activate those processes of convergence of politicalregimes and practices known as “democratic contagion.” As this contagion was experienced during the “third wave” ofdemocratization, mainly because of homogeneity among states and structural conditions for democratic attraction, theBRICS are not likely to repeat these dynamics. On the contrary, the only real constitutional homogeneity among the BRICScountries is the standard of non-interference in the internal affairs of each member. Non-interference also means abstainingfrom any initiative to condition the transformation of political regimes in consideration of the same interstate cooperation. Thedynamics of the BRICS shows that different political regimes can promote institutionalized forms of interstate cooperationwithout any mutual contamination at the constitutional level. The theories of “transition” and “democratic contagion” areinsufficient to understand these dynamics in the context of the BRICS; for this reason, the theory of democratic transitioncannot provide an adequate analysis of BRICS. With its members “split in unity,” as an institution the BRICS suggests anevolution toward a model of “not eurocentric dependence” that can overcome the “peripheral realism” of the role of eachstate in its own foreign policy.

The article focuses on the evolution of monetary cooperation among BRICS members and on testing the bilateral trade andexchange rate indicators to target transaction costs as they drive export growth. It starts with the formal arrangements toensure the settlement of trade among BRICS in local currencies. An analysis of the export structures of BRICS membersreveals benefits from shifts in export structure from 2009 to 2013, first from China’s role in vertical trade integration andthen, second, as a growing source of demand for BRICS economies. With regard to the exchange rate indicators, mosttrade responses to exchange rate deviations were found to depend on the overall structure of exports. Some BRICS currencydevaluations that anticipate inflation are attributed to exchange rate discrepancies and dumping. With regard to thedivergent effects on export, Russia’s export grew largely through mineral fuel and Brazil has gained from its deepened traderelationships. Therefore, transaction costs may be reduced via common trade settlement arrangements and trade facilitation.The author introduces ideas for designing BRICS payment and settlement mechanisms. One suggestion is to build aclearing union on the platform of BRICS conditional currency reserves similar to the reserve tranche mechanism used by theInternational Monetary Fund. Another addresses cross border local currency payment systems with fine-tuning transac -tions among national clearing systems and banks.

The article addresses the question whether the New Development Bank (NDB) will promote the role of the BRICS countriesin the global financial architecture and foster their development. It begins by comparing the key multilateral developmentbanks (World Bank, Asian Development Bank, African Development Bank and Inter-American Development Bank,European Bank for Reconstruction and Development) and national development banks of the BRICS countries with thenewly established institution. The NDB’s purpose is to mobilize resources for infrastructure and sustainable developmentprojects in the member countries. This purpose, as author concludes on the base of the analysis, partly duplicates the workof the existing institutions. However, the NDB could add to the functions of the existing institutions and become a significantdevelopment bank for its members. The best way to achieve this significance is to implement multilateral projects in the areasmentioned above. The article also examines the current role of the BRICS countries in the global financial architecture andthe potential for an increased role, brought by the establishment of the BRICS bank. The founding countries of the NDB willjointly determine the volume and directions of its financial aid. In addition, in contrast to the Bretton Woods institutions,the BRICS countries can change the rules of the development financial aid, particularly the conditions and system formonitoring results. The article concludes that the BRICS countries have created a possible way to change the current systemof development finance and therefore to increase the role of the BRICS countries in the global financial architecture.

What will be the future impact on multilateral lending shares of the New Development Bank (NDB) and the Asian InfrastructureInvestment Bank (AIIB), two multilateral banks created in 2014 outside the established Bretton Woods system?Will these new institutions led by China and the BRICS help rebalance multilateral development finance away from westerndominance? The answer comes in three parts: first, increasing pressure for the BRICS to exit´ rises with past, present andexpected failure for ´voice´ reform in the established international financial institutions (IFIs); second, excess demand formultilateral soft loans; and, third, a quantification of the potential lending capacity by the NDB and AIIB to assess howmuch relative business – hence political influence – the existing IFIs might lose in favour of the new competitors. The NDBand AIIB combined will likely attract sufficient co-financing to rival the established multilateral development banks interms of annual lending. This article concludes that infrastructure finance will benefit from the creation of the NDB andAIIB by tapping the considerable saving potential in China and other BRICS members. The new institutions should thereforebe supported, not discouraged, by western governments and donors as well. As the new multilateral development banksintroduce choice in terms of funding cost and modalities, borrowers are well advised to join these new institutions rapidlyfor their own benefit. Competition in multilateral development banking may have a negative impact on loan enforcementmechanisms. The IFIs of the existing Bretton Woods system and the new development banks will have to unite by imposingcross-default clauses to safeguard their preferred creditor status.

As a recent phenomenon, the BRICS continues to provoke heated discussions about its prospects and its sustainability asa community of like-minded actors. While observers can recognize common goals regarding international financial andeconomic architecture reform, the BRICS security agenda occupies a grey area of uncertainty. Meanwhile, as host of theBRICS in 2015–16, Russia sees as its main priority the transformation of the group from a loose forum into a full-fledgedmechanism for economic and political coordination and cooperation. Peace and security issues are thus included, and atleast lead to a limited conversion at the level of lowest common denominator. This limited conversion derives from a varietyof factors – geographical and geopolitical positions, diverse political historic tradition, different international political statuswithin current political governance system, close economic and political ties and complicated form of cooperation/competitionwith the established western powers, as well as differences in understanding and promoting their own global ambitionsand priorities. In this article, the evolution of Russia’s approaches toward the importance of the BRICS and its place withinRussian foreign policy priorities is considered, with attention given to political security, international law and global governance.While a number of problems would receive only minor attention and are more relevant to only some participants (suchas fighting illegal drugs or maritime security or certain regional conflicts), other issues need to be handled at the lowest commondenominator (such as reform of the United Nations Security Council or non-proliferation). BRICS members continueto find new areas of possible cooperation and take small but sure steps toward a mechanism of coordination among the fivecountries. The BRICS are vested with additional responsibility given that their cooperation and achievements in global politicaland economic governance reform offer an alternative to the domination of the advanced economies and a new modelof equal and mutually beneficial cooperation by the majority of developing countries.

The establishment of the BRICS New Development Bank signals the maturing of the financial relationships among thepartners of the “club.” This has acquired a heightened profile through the Cape Town Declaration, whereby the BRICSministers of science and technology committed to cooperation on science, technology and innovation (STI). This articleexplores some of the questions raised by the declaration, for example regarding the status of intra-BRICS STI cooperation,the rationale for the choice of specific fields of cooperation and the countries’ strengths in these fields. How do these fieldsalign with each country’s domestic STI strategy? What bilateral STI agreements are already in place, and what have theydelivered? How does the Cape Town Declaration align or compromise the India-Brazil-South Africa (IBSA) process? Willrising geopolitical tensions (Black Sea, China Sea) limit the scope of STI cooperation? This article also demonstrates whySouth Africa is important to the club. Addressing these questions requires a study of geopolitics, finance, trade and othermodes of engagement, STI included. One convenient framework is a macro-level PESTEL analysis, with a more detailedlook at the ‘T’ for technology, for which read STI. Other document analysis, and economic, social and STI indicators,together with bibliometric data provide the empirical basis for the arguments. The analysis, together with the identificationof national imperatives, allows an interrogation of the potential of the Cape Town Declaration. It is argued that South Africais not only the “Gateway to Africa,” but also that it displays the highest level of intra-BRICS scientific cooperation.

As a group formed by emerging powers, the BRICS is characterized by its particular profile: a pragmatic politic strategythat presents contradictory actions between its members. Internal cooperation among the BRICS members is becomingmore “institutional” with the creation of its financial institutions, the New Development Bank (NDB) and the ContingencyReserve Agreement (CRA). These have led the group to a next stage in its history without changing its essence. The NDBhas been created to mobilize resources for infrastructure and sustainable development projects in emerging and developingcountries, and the CRA has been established to provide liquidity to countries experiencing difficulties in their balance ofpayment and to head off future economic crises. Many developing countries are closely observing these financial institutions.South America appears particularly interested to take advantage of them by attracting investments and obtainingloans from BRICS members in order to develop infrastructure in their countries and to build more informal relationshipswith foreign partners with reduced political commitments. For South America, the BRICS is an example of a pragmaticformula for cooperation in contrast to the modus operandi of traditional powers. In other words, poor countries would havean alternative to the International Monetary Fund and World Bank. Relations between the BRICS and South America arecharacterized by a pragmatic approach that reflects the “way of being” of the group and the necessities of modernization ofthe region. This article analyzes the particular relationship that BRICS is establishing with the countries of South Americausing its institutional status and pragmatic approach.

The growing strength of Brazil, Russia, India, China, South Africa and other powerful emerging economies raises thequestion whether the world is facing the emergence of a more multilateral era of governance. In other words, has a newmultilateralism been launched? With regard to Brazil, as one of the BRICS pillars, its strong economic performance sincethe turn of the century has been overshadowed by China’s and India’s. Yet Brazil has been an excellent place to investover the first decade of the 21st century. Questions remain, however: How does Brazil stack up against the other BRICSmembers? What is the key to unlock its growth potential? This article adds a voice to this debate. The fundamental issueshere are whether Brazil’s relatively slow rate of economic growth compared with the breakneck growth rates in India andChina and its deep infrastructure deficiencies allow for including it in the same category as the other BRICS (especiallyChina and India). Is Brazil economically mature enough to increase its role in global governance institutions such as theWorld Trade Organization, the International Monetary Fund and the G20, or is it an economically overestimated regionalpower with high ambitions? Has Brazil any other comparative edge over both western and non-western competitors? Is it“underestimated” politically? This article is divided into several sections. First, it gives an overview of BRICS developmentand explains the research problem. Second, it points to the simultaneous economic, “external” expansion of the Brazilianeconomy and the underinvestment in its “internal” infrastructure, which, instead of unlocking the economy and its potential,serve de facto as an impediment. Third, it analyzes the “quest for power” in global governance institutions by both Brazil andthe BRICS. The concluding section presents the main findings.

The BRICS is an important rising force in the current global governance system. Since 2009, the priorities for cooperationamong BRICS members have been reforming the major international financial institutions. In recent years, those prioritieshave extended to include international security and development issues. At the regional level, BRICS leaders have helddialogues with their counterparts in Africa and South America at the Durban and Fortaleza summits respectively. However,the BRICS has not paid much attention to Asian economic issues and security issues in East Asia. This weak and unbalancedagenda towards Asian affairs is unusual considering the importance of Asia to BRICS members and the presence inthe BRICS of of three prominent Asian members with global ambitions. The absence of a strong Asian agenda reflects somedimensions of the BRICS grouping and the region itself. First, the priority of the BRICS countries is to promote their globalstatus, which makes global issues more attractive than regional issues. Second, the Asian members of the BRICS cannotsolve Asian security challenges individually or collectively. Third, as a region, Asia is not a highly integrated similar toAfrica and South America, partly because competitions among major powers including the Asian members of the BRICS.However, the BRICS cannot avoid exploring its influence in shaping Asia’s future considering the region’s rising importanceand challenges. In order to improve their influence in Asia against the background of competing regional institutions andthe renewed interest of the United States in Asia, BRICS countries need to coordinate their individual approaches to Asia,provide more regional public goods by multilateral means, offer either solutions or ideas to regional security issues, and finda more sustainable way to engage with the region.Is There a Role for the BRICS in Asian Affairs

This article provides an analysis of the BRICS as a whole and an analysis of each member’s policies in Africa. It exploresthe countries’ political and economic interests in Africa, the various patterns and strategies of each country’s cooperationwith Africa, and estimates the impact of BRICS aid and investment on the African economy and Africa’s development. TheBRICS countries have emerged as the new effective actors in the world arena. Their global economic weight and politicalinfluence continue to grow. Not only is the group focusing its attention on strengthening the internal ties of its members, but itis also focusing on assistance to Africa, as a way to implement the emerging powers efforts to change the existing world order.The BRICS is deepening its engagement with African countries, which gained great success in their development in recentyears. Its focus on Africa is determined by the important role of African resources and by the continent’s growing influencein the world economy and contemporary international relations. BRICS countries are major trade partners of Africa, andAfrica’s trade with BRICS members is growing faster than its trade with the traditional partners. Africa has become themain destination for BRICS development aid and investment. The BRICS is also focusing on African infrastructure. BRICScountries use soft power widely, through developing humanitarian ties with Africa, particularly in health care and education.The BRICS is also an active participant in peacekeeping and conflict resolution in Africa. Members currently tend tocompete in Africa, but they are taking steps toward collaboration. The BRICS contributes much to the African economy. Itspresence has become important for the continent and receives a positive response there.

South Africa joined the BRICS in 2011, two years after the establishment of this group. This step was consonant with themain principles of the country’s foreign policy expressed by its first democratic government. South Africa regarded the groupas an association of like-minded independent countries, a political and moral force for changing the world. However, byadmitting a leading African country, the four first members of the BRICS wanted to overcome the geographical divide andinclude a country that enjoys a high moral authority and plays important role in peacekeeping and mediating conflicts.Through the BRICS, South Africa wanted to achieve various goals: addressing poverty, inequality and job creation at home;gaining synergic support from BRICS partners to Africa; and obtaining increased support for the reform of internationalfinancial institutions and the United Nations. This article analyzes to what extent those plans have been realized during thefirst four years of South Africa’s membership in the BRICS and concludes that, all in all, South Africa is the last but not theleast member.