The unfolding of the international financial crisis that started in September 2008 and the failure of the institutions responsible for global financial governance to promote the reforms discussed and approved in the Group of Twenty (G20) to give more representation to the emerging economies and the developing countries were factors that contributed to the decision of the BRICS (Brazil, Russia, India, China, and South Africa) to create the New Development Bank (NDB) and the stabilizing fund nominated Contingent Reserve Arrangement (CRA).1 These initiatives were designed in 2012 and then introduced in 2014 at the VI BRICS Summit, in the city of Fortaleza, Brazil.
With functions similar to those of the World Bank and the International Monetary Fund (IMF), respectively, some analysts received the creation of NDB and CRA with some skepticism regarding their ability to make a difference as complementary mechanisms to the existing financial system.2 Others saw this initiative not only as a concrete action to build the BRICS joint financial architecture but also as an important step in establishing new international financing instruments in the face of huge infrastructure investment shortages and the strengthening of the global network of financial protection. These institutions may in the future compete with the World Bank and the IMF.3 Also, the announcement of the creation of the Asian Infrastructure Investment Bank (AIIB) in October 2013 by China has led other observers to affirm that a new international order was emerging, weakening US leadership in financial cooperation illustrated by the emergence of these new institutions.
In spite of this debate, BRICS addresses the launching of these initiatives as a complementary and partnership role of these institutions with the World Bank and the IMF and as an instrument of financial cooperation resulted from the deepening of relations between their founding countries (Brazil, 2014a). Regarding the CRA, the Decree of the Presidency of the Republic of Brazil presents it as a platform for mutual support among the Group’s countries, with liquidity and precautionary instruments in response to short-term pressures (actual or potential) on the balance of payments. It
would, therefore, be an initiative to strengthen the global financial security network and complement the existing international monetary and financial arrangements (Brazil, 2014b). It was established that to constitute the “arrangement,” each BRICS country shall place part of its reserves in US dollars or other convertible currency available to any of the other members of the group, in case of difficulties in the balance of payments.
