IBRE economist analyzes the Bank of BRICS

With a focus on infrastructure projects, the Bank of BRICS will receive US$ 10 million from each country of the bloc: Brazil, Russia, India, China and South Africa. The economist Lia Valls, of the Applied Economics area of the Brazilian Institute of Economics (FGV/IBRE) evaluates the investment. At first, the allocation of resources will be equal. It is still not clear how the projects will be shared later on - the plan is to have a bank more concerned with development issues, she said.For Brazil, according to her, the creation of the bank is a facilitator to enter more effectively in the African market. Brazil has interests in Africa when it comes to physical infrastructure, that is, roads and construction. We are already present in African Portuguese-speaking countries, as well as China. So, the Bank of BRICs can help building more technical cooperation projects between Brazil and China, said Lia.Although Brazil is the only Latin country in the group, South America can also benefit economically with the bank. The South American Regional Infrastructure Integration project (IIRSA) - which aims at developing the transport, energy and telecommunications sectors in the region, for example - can be leveraged by the Bank of Brics. Since the focus of the bank is infrastructure projects and South America is focused on physical integration to develop the economic integration of Latin American countries, the region is bound to benefit from it, said the economist.For the rest of the world, the creation of the bank confirms the importance of the BRICS in the global economy. Still according to Lia Valls, the bank will in fact give greater visibility to the group; if it works well it may be important to exert influence on the discussions on global governance issues. In addition, the bank can be a counterpoint to investment in high-risk countries. Most African countries offer high risks and some countries in South America are in the same situation. In such cases, the World Bank requires more warranties to approve loans. Therefore, the Bank of BRICS may have the differential of making the closing of loans easier to certain countries with the highest risk, concluded Lia.
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