adminLEADERS of the BRICS grouping have agreed to implement vigorous measures to enhance trade and investment co-operation, including a BRICS ratings agency.
The prospect of a new agency comes amid accusations from within the bloc that the three traditional agencies — Moody’s, S&P Global Ratings and Fitch — are all western-based and favour those economies. The three, together, account for 90 percent of the global ratings market.
Plans for the agency follow the establishment of a Brics bank 12 months ago with an initial capital of $100 billion, which has been seen as a challenge to western-based institutions.
Reading out the GOA declaration on Sunday, Indian Prime Minister Narendra Modi announced a raft of investment initiatives including the new ratings agency.
“We feel it’s necessary to make public investments in long term infrastructure projects. In order to bridge the gap in the global financial architecture we agreed to fast track the setting up of the BRICS rating agency,” said Modi.
This has emerged at the summit of leaders from Brazil, Russia, India and China and South Africa (BRICS) at India’s south-west resort of Goa. The move by BRICS is part of increasing cooperation in various sectors of the global economy.
Plans to open the BRICS bank Africa regional centre in Johannesburg are afoot. The BRICS Bank is asking leaders to back it when it seeks observer status at the United Nations. The gathering, attended by President Jacob Zuma of South Africa, comes at a crucial time when all five-member countries are facing various economic difficulties. South Africa faces the prospects of its credit rating being downgraded at the end of the year, while Brazil was downgraded this year.
The BRICS grouping brings together 1.5 billion people in the region with a combined GDP of over 2.5 trillion US dollars. Emerging economies claim western ratings companies are biased, optimistic on developed nations and pessimistic on developing ones.
Russia, in particular, and China have been perturbed by the western ratings firms. South Africa, hovering precariously just above junk status, is expected to host the ratings agencies from November until early December. Fears are that the country could slide into the junk status by the end of 2016, which could make borrowing more expensive.
Sunday’s resolution to speed up the creation of the ratings agency was, however, not without its own hurdles.
According to Indian e-paper Live Mint, a day before the weekend summit got under way, China had indicated that it was not in favour of the proposed agency.
Brics was formed in 2011 with the aim of using its members’ growing influence to challenge Western hegemony.
The nations have a joint estimated GDP of $16-trillion and account for 53 percent of the world’s population. — Wires
Online Reporter