The commitment of $100 billion by Brazil, Russia, India, China and South Africa (BRICS) to stabilize the battered currencies of emerging markets won’t to do much to impress the $5.3 trillion-a-day foreign exchange market.
It is not just that it is a relative drop in the bucket. For one, it is a paper promise at this point; no cash has been ponied up yet. For another, it is a considerably smaller sum than the $240 billion discussed by the same group when they met ahead of last year’s G-20 meeting. At that time the threat to emerging-market currencies from the possible unwinding of the U.S. Federal Reserve’s stimulus was just a fear, not the reality it has since become.
If anything, the proposal again underlines the disparate interests of the individual BRICS members, and the rivalry between them. India’s recent suggestion that emerging economies should coordinate their intervention in the foreign-exchange markets was simply ignored. “This is India’s initiative to resolve India’s issues,” South Africa’s Finance Minister Pravin Gordhan said. Similarly India and Brazil were told by Russia and China that their current-account deficits were the root of their currency problems, and reducing those lay in their own hands. True — but hardly an expression of fraternal support and solidarity.
The same divisions are to be seen in the lack of progress in the BRICS’ other main initiative, the creation of a joint development bank. Both how the contribution of its $50 billion in initial capital — and thus voting power — should be shared between the BRICS nations and where the bank should be located remain undecided. (The debate on that last question is stuck at anywhere but bank-rolling China.)
And there’s the rub. The five BRICS stand apart as much as they stand together. All they really share is an embrace of state capitalism (albeit with differing degrees of fervor, competency and success) and a desire to forge a non-Western-dominated economic order. That is too weak a basis from which to turn an acronym into an alliance.