In July 15 2014, the BRICS countries, in their Sixth BRICS Summit in the city of Fortaleza, Brazil, decided to create two economic institutions. The New Development Bank (\u201cBRICS Bank\u201d), with initial capital of 50-billion dollars, with its headquarters in the Chinese city of Shanghai. The BRICS also created a 100-billion dollars Contingent Reserve Arrangement to tackle financial crises.<\/p>\n
Political concessions were made, in order for the five countries (Brazil, Russia, India, China and South Africa) to reach agreement on the creation of new institutions. Such concessions included not only the institutional design of new institutions, but as well ongoing conflicts in the Middle East and Ukraine. Faced with \u201cpersistent political instability and conflict in various global hotspots and non-conventional emerging threats\u201d, BRICS adopted a cautious posture. In the Final Declaration of the Fortaleza Summit, humanitarian issues and multilateral solutions for conflicts were emphasized, apart from reiterating previous items from previous Summit Declarations (such as the need to reform the United Nations Security Council).<\/p>\n
The new robust institutions place focus on redirecting the world\u2019s economic architecture, against the backdrop of political cautiousness. The Contingent Reserve Arrangement is the outcome of BRICS\u2019 responses to the 2008 crisis, after which they stood as leading lights of world\u2019s economic growth. The creation of a \u201cBRICS Bank\u201d is a direct response to the reluctance of developed countries in reforming IMF and the World Bank after 2008. Concessions were made for BRICS in terms of voting shares in IMF and investment criteria in the World Bank. In terms of decision-making power, such concessions were clearly below the expectations of BRICS countries, now representing 25% of the world\u2019s GDP, 42% of the world\u2019s population and an expressive contributions for so-called \u201cnew middle classes\u201d in world economy.<\/p>\n
The creation of two institutions simultaneously turns into reality many demands made vocal since 2008. It signalizes that BRICS have matured politically as a group, and now have legitimacy for bolder steps (the Final Declaration mentions the beginning of a \u201cnew cycle\u201d of BRICS activities). With enhanced political capacity, BRICS no longer needed to wait for the Bretton Woods institutions to reform. At the same time, the institutional design of the new BRICS institutions raises doubts about their future effects.<\/p>\n
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