© AFP Photo/Yasuyoshi ChibaBrazilian President Dilma Rousseff (R) makes a speach during the 6th BRICS Summit in Fortaleza, Brazil, on July 15, 2014
For the past 70 years, the International Monetary Fund and the World Bank have been the pillars of the world's economic system, coming to the rescue of countries in trouble and supporting development projects, respectively.
Comment: The idea that the IMF and World Bank "came to the rescue of countries in trouble" is one much espoused through the mainstream media, but the reality is that they do anything but rescue those countries. The truth is that those institutions have been at the heart of allowing foreign corporations to invade poor countries and strip them of their natural resources and raw materials, all for the gain of the greedy 1%. The only thing these institutions have been the pillar of is increasing the wealth and power of the psychopathic elite.
But the Bretton Woods institutions are regularly criticised for their inability to reflect the growing and important contributions of the major emerging economies to the global economy.
China, the world's second-largest economy, continues to have just slightly more voting power in the IMF than Italy, about five times smaller. And, since their creation in 1944, the IMF and the World Bank have only been led by Americans and Europeans.
"Broader global governance reforms have become stalled, despite the many commitments made by advanced economies to emerging markets to give them a more prominent role in international financial institutions and other international forums," said Eswar Prasad, a trade policy professor at Cornell University and a former IMF expert.
© AFP Photo/Nelson Almeida(L to R) Russian President Vladimir Putin, India's PM Narendra Modi, Brazilian President Dilma Rousseff, China's President Xi Jinping and South Africa's President Jacob Zuma during the 6th BRICS Summit in Fortaleza, Brazil, on July 15, 2014
"If the existing institutions were doing their jobs perfectly, there would be no need to go to the trouble of creating a new bank, a new fund," said Paulo Nogueira Batista, who represents Brazil and 10 other countries at the IMF, in an interview.
The mere creation of the two BRICS institutions sends a strong signal to Western powers, where some doubt the ability of the five powerhouses to surmount their individual needs and ambitions.
The launches "are significant actions that represent a game changer as they turn statements and rhetoric about cooperation among these countries into reality," Prasad said.
Still, many areas of uncertainty cloud the new BRICS structures, giving the IMF and the World Bank a long lead on their fledgling rivals.
© AFP Photo/Yasuyoshi Chiba)Chinese President Xi Jinping (C) shakes hands with Russian President Vladimir Putin (L) and Indian Prime Minister Narendra Modi during the 6th BRICS Summit in Fortaleza, Brazil, on July 15, 2014
For now, only the BRICS countries will be able to draw from the $50 billion in the New Development Bank and $100 billion in the Contingent Reserve Arrangement.
However, proof of the new institutions' effectiveness will come when other countries knock at their door for money.
"Will the BRICS take the financial risk to lend to other countries? And what conditions will they impose?" said an IMF official, who spoke on condition of anonymity.
Accustomed to bailing out a country, and being reimbursed, in exchange for austerity conditions, the IMF has the kind of expertise that "doesn't happen overnight," the official said.
© AFP Photo/Nelson AlmeidaChina's President Xi Jinping (L) is welcomed by his Brazilian counterpart Dilma Rousseff at Planalto Palace on July 17, 2014 in Brasilia (
Aware of their current limitations, the BRICS made a point to say they were working closely with the IMF. Some of their financing would be available only to countries already receiving Fund assistance.
Dilma Rousseff, the president of Brazil, said the creation of the BRICS institutions did not mean her country was moving away from the IMF.
"We have not the least interest in distancing ourselves from the IMF," she said. "On the contrary, we wish to democratize it and make it as representative as possible."
Unsurprisingly, the Bretton Woods institutions responded with offers of cooperation.
The IMF managing director, Christine Lagarde, said in a statement Wednesday that her staff would be "delighted" to work with the BRICS team on the reserve fund.
The World Bank, facing other new development rivals and undergoing a major internal restructuring, welcomed the arrival of an "invaluable partner" in the battle against poverty, a bank spokesman told AFP.
This display of friendliness, however, could in time give way to rivalries and battles for influence in the corridors of the 188-nation institutions, based in Washington.
"The new institutions aren't created against anyone," said Nogueira Batista, the IMF representative.
"But they are a first step toward a multilateral world."
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