There is a new team in the international lending game. Brazil, Russia, India, China and South Africa, or the BRICS countries, announced their own development bank this week.
"The historic dimension of our summit can be demonstrated by the importance of the agreements we signed," said Brazil's President Dilma Rousseff. "The BRICS acquired political importance and enforce their role in the international sense."
Headquartered in Shanghai, the bank debuted with a commitment of $100 billion; the capital will be divided among the five member countries. The first president will be from India. The board of directors will be led by Brazil, and the African regional lending branch will be based in South Africa.
The BRICS nations see their bank as a counter to what they view as a Western-dominated financial order. It will also be a means to provide security, investment and growth resources to themselves and other emerging countries. They have long argued for more of a say in the global system. They chafe at the way lenders like the World Bank and the International Monetary Fund (IMF) put restrictions on the countries they help.
After feeling as if they were not being heard, the countries in BRICS say it is time for change. "It puts some pressure on the IMF and World Bank to reform quicker," says Kirill Dmitriev of the Russian Direct Investment Fund. "Because unless they reform and take BRICS nations into account more, I think this institution will be more dominant in the BRICS countries."
The World Bank acts as a loan provider for developing countries with twin goals of ending extreme poverty and promoting shared prosperity. Established after World War II, the IMF says its fundamental mission is to help ensure stability in the international system. It tracks the global economy and lends to countries with payment difficulties.
However, IMF loans are not free money; their help often comes with strings attached. Ukraine, for example, is one of the most recent recipients of an IMF loan. The agency approved a $17 billion package in April, on the condition that the Kiev government follow strict economic reforms, such as raising taxes and energy prices.
"They are not ready," said Maricruz MaGowan, an economist and vice president of the National Economists Club. "They are risking a lot, they are risking the progress in the last 10 years for the projects that will not render in the benefit they think they will have."
BRICS is looking to provide loans for infrastructure and development projects, building up other emerging economies. Officials say it could be two years before the bank starts lending. There is also the possibility that other countries such as Turkey, Mexico and Indonesia could join at a later date.
The BRICS nations contain 42% of the world's current population, making up around 20% of the world's GDP. The announcement of a new development bank is a major moment for global banking, and these nations and their governments have huge economic potential. At the same time, BRICS nations all have unique and varying interests that are often at odds with Washington.
What is the significance of the BRICS development bank?
What are developing countries’ grievances with institutions like the World Bank and IMF? How much merit do these grievances have?
What agenda unites the BRICS countries? Is there enough that binds them?
We consulted a panel of experts for the Inside Story.