BRICS nations meet to cement relationships
by Matt Davies, BBC News
March 26th 2013
The humidity and sub-tropical rain in South Africa's port city of Durban is doing little to dampen the enthusiasm for the fifth Brics summit, the first time the leaders of Brazil, Russia, India, China and South Africa have met in Africa.
The grouping has come a long way since 2001, when the acronym was first coined by the then head of global economics for Goldman Sachs, Jim O'Neill.
The largest emerging economies represent 25.9% of the world's land mass, 43% of the population and 17% of global trade. The group also accounts for a quarter of the world's gross domestic product (GDP) in terms of purchasing power parity.
Indeed, a recent report from the United Nations Development Programme states that "by 2020, the combined economic output of three leading developing countries alone - Brazil, China and India - will surpass the aggregate production of Canada, France, Germany, Italy, the UK and the United States".
Enthusiasts will spend this week pointing to the latest woes of the eurozone and the crisis in Cyprus, to give force to their argument that the fulcrum of world economics is changing and the Brics are at the centre of that change.
"We've never seen the total realignment of global politics and economics the way we've seen in the last two to three years," says Abdullah Verachia from the consultants Frontier Advisory. "That's why this Brics grouping has become so influential."
'Stimulating conversations'
Others are less enthusiastic.
Ruchir Sharma, the head of emerging markets at Morgan Stanley, points out that the Brics are split over commodity prices. China and India, which import vast amounts of commodities, want lower prices. The exporters of Brazil, Russia and South Africa want higher prices.
There are also several other sources of tension between the Brics on trade issues.
Cheap imports from China into South Africa have been blamed for at least part of the decline in the country's manufacturing sector. South Africa itself has been taken to the World Trade Organization (WTO) in a row over the import of Brazilian chickens. Regulations and bureaucratic red tape in India have also troubled its Brics partners.
"Making it easy to do business is certainly something that will assist in the growth of trade between the Brics countries," says Sunil Joshi, chief executive of Neotel, a South African telecoms company largely owned by the Indian conglomerate Tata.
"I think intellectually stimulating conversations will happen at the Brics Summit to enable that.
"We look forward to some of the progress being made in that space."
Location and cost
One of the biggest conversations that is due to happen at the summit is about the possible foundation of a Brics bank.
There is a tremendous desire to set up a development bank that would aim to improve infrastructure within the Brics nations.
Part of this desire stems from a feeling of mistrust that the Brics, particularly China, have towards established structures such as the International Monetary Fund (IMF) and the World Bank.
But while the member countries need additional sources of funding to undertake large infrastructure projects, experts do see potential problems.
One question is, where would the bank would be headquartered? South Africa is keen to play host, but it is also thought that Russia feels Moscow would be the best location.
There is also the issue of money, or rather - how much would the member states be willing to put in?
One figure being banded about is $10bn each - chump change to China, but a major outlay for the much smaller South African economy.
What is fair?
The rationale behind equal contributions would be to make it an even playing field - no one country could dominate the Brics bank.
But this is not the only consideration.
"South Africa's under 3% of the total Brics's economy size," says Catherine Grant, of the South African Institute of International Affairs.
"So is it really fair to have equal contributions into a pool like this?
"I think it'll be another couple of years before a Brics bank will actually come into operation."
Nonetheless, the enthusiasm to make this Brics summit a success remains, especially on the part of the host, South Africa.
If that enthusiasm comes close to that displayed by the traditional Zulu dancers greeting the arriving delegates at Durban's King Shaka airport, success will be almost guaranteed.