Washington has found it difficult to understand the BRICS’ dual strategy of affirming the existing governance structure even as they build alternative institutions that challenge it from within. Though the BRICS countries avoid frontally attacking American hegemony, they contest the West’s pretensions to permanent stewardship of the existing system, particularly since the 2008 financial crisis, scandals like the manipulation of Libor (the benchmark to set payments on global financial instruments from mortgages to derivatives), and the persistent threat of Western economic sanctions. The BRICS intend to be the governors of their new institutions, both as formal ruler makers, and also informally in the jockeying behind closed doors for comparative advantage that pervades all cooperative endeavors. Their revisionist aims, of course, hinge on an erosion of the West’s multilateral ability to steer the emerging multipolar world, which is far from foreordained despite a loss of credibility since the start of the financial crisis. Washington has repeatedly shown its ability to divide and co-opt BRICS members, even persuading them to contribute new funds to the IMF to bail out European countries in 2012. Similarly, while all the BRICS are now focused on the World Trade Organization and a Brazilian, Roberto Azevêdo, won the Secretary General position in 2013, America has shifted its focus to conclude new regional trade agreements in the Pacific rim and Europe to maintain its dominance. As an Indian participant in the BRICS forums astutely observed, these agreements are meant to “exclude BRICS countries” and “the U.S. and other western countries are not going to cede space on the global trading giants table easily.”
Experts agree that the United States and European Union are partly to blame for the emergence of a parallel non-Western economic architecture. A principal shared BRICS grievance featured in all communiques is that the United States and Europe have denied them governance roles commensurate with their larger global economic weight. Yet so long as the U.S. Congress continues to block a 2010 reform of voting shares in the IMF that would help address such objections, Brazil has fewer shares than Belgium, through its economy is five times larger. China’s share is only 60 percent of Japan’s though its economy passed Japan’s in 2010 and now accounts for more than 12 percent of world GDP. Combined, the BRICS account for more than 20 percent of global economic activity but control only 11 percent of the voting power in the IMF.
The allocation of voting rights is determined by a country’s GDP and a host of other macroeconomic policy variables. Since consensus on a policy or action is achieved at 85 percent and the U.S. holds about 17 percent of the votes, it can veto policies it doesn’t favor. At Ufa, the BRICS will call again for breaking the deadlock on the long-stalled IMF reform and other changes. But the rebalancing of quotas and voting shares negotiated in 2010 that bolsters the BRICS is widely considered too little too late. Liberal economists from BRICS countries show how the formula that determines quotas is stacked against the rising economic powers, and that if greater weight was given to each country’s international reserves and its economic size in proportion to the world economy, there would be a significant rise in BRICS’ voting shares. Because such a reform would adversely impact European positions and cost the United States its veto power, it’s a non-starter.
Some participants in BRICS meetings speculate that China no longer would be satisfied being second to the United States in Bretton Woods institutions, and now prefers to focus on building parallel institutions. Besides the NDB, there is also a Contingent Reserve Arrangement (CRA) to help the BRICS countries forestall short-term balance of payments pressures and tide over member countries in financial difficulties. Unlike the IMF, the CRA is structured as a web of bilateral promises to make $100 billion of foreign reserves available to BRICS countries in need, with each country able to draw a multiple of its contribution. However, the CRA doesn’t fully demonstrate BRICS willingness to go it alone, or without conditionality, as it requires an IMF arrangement for countries to gain 70 percent of the maximum access of funds. Other initiatives include a BRICS credit rating agency, building on Chinese and Russian ventures, increased bilateral currency swaps, and expanded mechanisms for enabling and settling BRICS cross-border trade in local currencies. Already 25 percent of bilateral trade between Russia and China is now settled in yuan.