BRICS

Enlargement. The grouping was enlarged from 2024. Alongside Brazil, Russia, India, China and South Africa, the BRICS joint information portal lists Egypt, Ethiopia, Iran, the United Arab Emirates, Indonesia and Saudi Arabia, together with a wider circle of partner countries including Belarus, Bolivia, Cuba, Kazakhstan, Malaysia, Nigeria, Thailand, Uganda, Uzbekistan and Vietnam.

State the enlargement with that qualification and no more. Because BRICS rests on no treaty, there is no membership clause to read and no instrument of accession to check; a country becomes a member by a summit decision and by attending. This book has not read those decisions, so the list above is given as the portal lists it. An answer that recites a confident membership list with dates is claiming to know something the sources do not establish.

What BRICS is, legally

This is the point that distinguishes BRICS from the other two organisations on this syllabus, and it is the best answer a student can give.

BRICS is a forum, not an organisation. Its output is the annual summit Declaration, which is a political document and not a treaty. Ministers, central bank governors and officials meet under its name through the year, and there is a chair but no institution.

And yet it has produced two binding treaties, which is why the topic is on an economics syllabus at all. The New Development Bank Agreement and the Contingent Reserve Arrangement Treaty are proper international agreements creating proper institutions with capital, votes and obligations. The grouping is soft and its creations are hard.

The New Development Bank

Established by the Agreement signed at the sixth BRICS summit at Fortaleza in 2014. Its purpose, in its own words, is to mobilise resources for infrastructure and sustainable development projects in the BRICS countries and other emerging market economies and developing countries.

Article 2: membership, voting, capital and shares.

• Founding members: Brazil, the Russian Federation, India, China and South Africa.
• Membership is open to members of the United Nations, and to borrowing and non borrowing members alike.
• Initial subscribed capital 50 billion US dollars; initial authorised capital 100 billion.
• "The initial subscribed capital shall be equally distributed amongst the founding members", and "the voting power of each member shall equal its subscribed shares".

That sentence is the whole political point of the Bank, and it should be quoted in an answer. Each of the five founders subscribed 100,000 shares, 10,000 million dollars, 18.72 per cent of the total. At the World Bank and the International Monetary Fund, votes follow economic weight, so the United States holds enough to veto decisions requiring a special majority and the developing world holds little. The New Development Bank was designed so that China, whose economy is several times India's or South Africa's, has exactly the same vote as South Africa. That equality is the answer to the 2001 paper's complaint that the forums did not reflect their members.

Article 3: headquarters and management. The Bank's headquarters are at Shanghai. It has a Board of Governors, a Board of Directors, a President and Vice Presidents; the President is elected from one of the founding members on a rotational basis, and there is at least one Vice President from each of the other founding members. Operations are to be conducted "in accordance with sound banking principles".

Article 6: voting. Each member's voting power equals its subscribed shares. Matters are decided by a simple majority of the votes cast unless otherwise provided; a qualified majority is two thirds of the total voting power; and a special majority is an affirmative vote of four of the five founding members together with two thirds of the total voting power.

Article 7: capital. Authorised capital 100 billion dollars divided into one million shares of 100,000 dollars each. Subscribed capital 50 billion, of which 10 billion paid in and 40 billion callable. The Board of Governors reviews the capital stock at intervals of not more than five years.

Article 8: the three protections. No increase in any member's subscription may take effect which would have the effect of:

1. reducing the voting power of the founding members below 55 per cent of the total;
2. increasing the voting power of non borrowing members above 20 per cent;
3. increasing the voting power of any non founding member above 7 per cent.

Read those three limits together and the design is complete. The five founders keep control; countries that only lend and never borrow cannot dominate, which is a direct answer to how the Bretton Woods institutions are governed; and no newcomer can become a second China. The Bank was built by people who had studied exactly how the institutions they were dissatisfied with had come to be dominated.

Membership since. The Bank records the five founders as members from 3 July 2015, and has since admitted Bangladesh (16 September 2021), the United Arab Emirates (4 October 2021), Egypt (20 February 2023), Algeria (19 May 2025) and Uzbekistan (5 June 2026), with further prospective members which become members on depositing their instrument of accession. Its first President was K.V. Kamath, appointed at the inaugural meeting of the Board of Governors on 7 July 2015. It opened an Africa Regional Centre at Johannesburg in 2017 and an Americas Regional Office at São Paulo in 2019.

Note that the Bank's membership and the grouping's membership are not the same list. Bangladesh, Algeria and Uzbekistan are members of the Bank; the portal does not list them among the BRICS countries. A treaty institution admits members by its own rules, and a forum does not.

The Contingent Reserve Arrangement

The Treaty for the Establishment of a BRICS Contingent Reserve Arrangement, 15 July 2014, Fortaleza, Brazil, between Brazil, Russia, India, China and South Africa.

Its purpose, from the preamble and article 1: a self managed contingent reserve arrangement to forestall short term balance of payments pressures, to provide mutual support and strengthen financial stability, and to contribute to strengthening the global financial safety net and complement existing international monetary and financial arrangements. It provides support through liquidity and precautionary instruments in response to actual or potential short term balance of payments pressures.

In the language of [Correcting a Disequilibrium], the Contingent Reserve Arrangement is a financing measure: it does not correct a deficit, it lends the foreign exchange to carry a country through one. It is a regional alternative to going to the International Monetary Fund, which is what India had to do in 1991.

Article 2: size and individual commitments. Total committed resources 100 billion US dollars:

Note what the treaty then says, because it is the cleverest provision in it. Until a request is made, acceded to and effected through a currency swap, each party retains full ownership and possession of the resources it commits. Commitments do not involve any outright transfer of funds. No money is ever paid over into a pool. Each country simply promises to swap currency if asked, so the arrangement costs nothing to maintain and exists entirely as an obligation.

Article 5: access limits and multipliers. A party may draw a multiple of its own commitment:

The multipliers reverse the commitments, and that is deliberate. China puts in the most and may draw the least relative to what it put in; South Africa puts in the least and may draw twice it. The arrangement is therefore redistributive by design: the largest economy underwrites the smallest, which is the opposite of how a commercial pool would be built and is the point of calling it mutual support.

The 30 and 70 rule, which is the most examinable feature of the Treaty:

• 30 per cent of a party's maximum access, the "de linked portion", is available subject only to the agreement of the providing parties.
• The remaining 70 per cent, the "IMF linked portion", additionally requires evidence of an on track arrangement between the requesting party and the International Monetary Fund involving a commitment by the Fund to provide financing based on conditionality.

That split is the most honest thing in the whole of BRICS, and a good answer says so. Having been created out of dissatisfaction with the Fund, the five founders nevertheless made seventy per cent of their own emergency facility conditional on a Fund programme. The reason is that lending to a country in a balance of payments crisis requires somebody to impose and monitor the adjustment, and none of the five wished to be the government that told another how to run its economy. The Arrangement is a complement to the Fund and not a replacement for it, and it says so in its own preamble.

What BRICS is for, and what it is not

What it does.

1. Coordinates positions of large developing economies in the International Monetary Fund, the World Bank, the G20 and the World Trade Organization, pressing the argument of the 2001 paper that voting weights should follow economic weight.
2. Provides development finance through the New Development Bank, on terms and with governance the founders control.
3. Provides a financial safety net through the Contingent Reserve Arrangement.
4. Gives its members an alternative forum, which is worth something to a country that wishes not to be confined to arrangements designed elsewhere.

What it is not.

• Not a trade bloc. It has no free trade agreement, no common external tariff and no trade liberalisation programme, and in this it is the opposite of SAARC, which has a trade agreement and no politics, where BRICS has politics and no trade agreement.
• Not a currency union. Talk of a common BRICS currency is discussion, not instrument.
• Not an alliance. Two of its members have an unsettled border, and its members' foreign policies differ sharply.
• Not homogeneous. It contains the world's second largest economy and economies a fraction of that size, energy exporters and energy importers, democracies and others.

Why the diversity matters for an answer. A grouping whose members compete with each other for the same export markets and, in one case, contest a frontier cannot integrate the way a region can. What it can do is agree on the reform of institutions, because on that one question all its members want the same thing.

A worked example: South Africa draws on the Contingent Reserve Arrangement

Suppose South Africa faces short term balance of payments pressure and turns to the Arrangement. The Treaty answers every question in order.

Now compare the same country's position in 1991 style circumstances without the Arrangement: it would go to the Fund for the whole amount and accept conditionality on all of it. With the Arrangement it obtains 3 billion dollars free of external conditions and must satisfy the Fund only for the remainder.

That 30 per cent is exactly what BRICS has achieved in this field: not independence from the International Monetary Fund, but a first line of defence that does not need it. Whether three billion dollars is enough to matter depends entirely on the size of the shock, and an answer that says so is being accurate rather than dismissive.

What beginners get wrong

"BRICS was founded by a treaty." It was not. The acronym came from a Goldman Sachs paper of 30 November 2001; the first summit was at Yekaterinburg in 2009; and the two treaties of 2014 establish a bank and a reserve arrangement, not the grouping.

"BRICS has a secretariat." It has none. The chair rotates with the summit host.

"The New Development Bank is like the World Bank." Its voting rule is the opposite: each founding member subscribed equally and votes equally, and article 8 protects the founders' 55 per cent, caps non borrowing members at 20 per cent and any non founding member at 7 per cent.

"The Contingent Reserve Arrangement is a fund with money in it." No money is transferred. Each party retains full ownership until a swap is actually made.

"The Arrangement replaces the International Monetary Fund." Seventy per cent of any drawing requires an on track Fund arrangement. Only the 30 per cent de linked portion is free of it.

"BRICS is a trading bloc." It has no trade agreement of any kind.

"BRICS membership is fixed at five." It was enlarged from 2024; but because there is no treaty, the membership is a matter of summit decisions and should be stated with that qualification.

Limits

There is no constitutive instrument to read, so a chapter on BRICS necessarily rests partly on summit documents and official portals rather than on a text.

The membership list is given as the BRICS joint information portal lists it, and this book has not read the admission decisions.

Bank membership and grouping membership differ, and conflating them is a real error.

Figures for the Bank's shareholding change as new members subscribe, and the shares quoted are those the Bank published when this chapter was written.

Political direction changes with the chair. A summit declaration binds nobody, and what one summit announces the next may not pursue.

Quick revision

1. Origin: "Building Better Global Economic BRICs", Jim O'Neill, Goldman Sachs, 30 November 2001. At end 2000 the four were about 23.3 per cent of world output at purchasing power parity and 8 per cent at current prices, and the paper argued that world policy making forums should be reorganised.
2. First summit Yekaterinburg 2009 as BRIC; South Africa joined, making BRICS; enlarged from 2024.
3. No founding treaty, no charter, no secretariat. Output is the annual summit Declaration. Contrast the Marrakesh Agreement and the SAARC Charter.
4. Two treaties, both signed at the Fortaleza summit in 2014: the Agreement on the New Development Bank and the Treaty for the Establishment of a BRICS Contingent Reserve Arrangement.
5. New Development Bank. Founding members Brazil, Russia, India, China, South Africa. Headquarters Shanghai. Authorised capital 100 billion dollars, subscribed 50 billion, paid in 10 billion, callable 40 billion, one million shares of 100,000 dollars. Subscribed capital equally distributed among the founders; voting power equals subscribed shares, so each founder holds 18.72 per cent. President elected from a founding member by rotation, with a Vice President from each of the others.
6. Article 8's three limits: founders never below 55 per cent; non borrowing members never above 20 per cent; any non founding member never above 7 per cent.
7. Contingent Reserve Arrangement, 15 July 2014, Fortaleza. A self managed arrangement against short term balance of payments pressures, through liquidity and precautionary instruments, complementing existing arrangements. 100 billion dollars: China 41, Brazil 18, Russia 18, India 18, South Africa 5. No funds are transferred; each party retains ownership until a swap is effected.
8. Multipliers: China 0.5, Brazil, Russia and India 1, South Africa 2. 30 per cent de linked, needing only the providing parties' agreement; 70 per cent IMF linked, needing an on track Fund arrangement.
9. BRICS is not a trade bloc, not a currency union and not an alliance. Its common ground is the reform of the international institutions.

Test yourself

1. Trace the origin and development of BRICS. The acronym was coined in a research paper, not in a chancellery. On 30 November 2001 Goldman Sachs published "Building Better Global Economic BRICs" by Jim O'Neill, which observed that real growth in the large emerging market economies would exceed that of the G7, that the combined output of Brazil, Russia, India and China had at the end of 2000 been about 23.3 per cent of world output at purchasing power parity and about 8 per cent at current prices, that the weight of these economies and of China in particular would grow, and that world policy making forums should therefore be reorganised. The four countries adopted the argument and the name, and held their first summit as BRIC at Yekaterinburg in Russia in 2009.

South Africa joined shortly afterwards, making BRICS, and is one of the five founding members of the New Development Bank. Summits have been held annually since, at Brasilia, Sanya, New Delhi, Durban, Fortaleza, Ufa, Goa, Xiamen, Johannesburg, Brasilia, Saint Petersburg, New Delhi, Beijing, Johannesburg, Kazan and Rio de Janeiro, the host holding the chairmanship for the year. At the sixth summit, at Fortaleza in 2014, the members signed the two agreements that give the grouping its only binding legal form, the Agreement on the New Development Bank and the Treaty for the Establishment of a BRICS Contingent Reserve Arrangement. From 2024 the grouping was enlarged; alongside the original five, the BRICS joint information portal lists Egypt, Ethiopia, Iran, the United Arab Emirates, Indonesia and Saudi Arabia, together with a wider circle of partner countries. Because BRICS rests on no treaty there is no membership clause to construe, and the enlargement was made by decision at a summit.

2. What is the legal character of BRICS, and how does it differ from the WTO and SAARC? BRICS is a forum, not an organisation. The World Trade Organization was established by the Marrakesh Agreement of 1994, has a permanent Secretariat at Geneva headed by a Director General, and takes decisions by consensus with a vote in reserve under article IX. SAARC was established by a Charter signed at Dhaka on 8 December 1985, has a Secretariat at Kathmandu since 17 January 1987, and takes decisions by unanimity under article X. BRICS has no founding treaty, no charter, no permanent secretariat and no headquarters; its chair rotates with the summit host, its decisions are taken by consensus among the leaders, and its output is the annual summit Declaration, which is a political document creating no obligation enforceable anywhere.

The paradox worth stating is that this soft grouping has created two hard institutions. The Agreement on the New Development Bank and the Treaty for the Establishment of a BRICS Contingent Reserve Arrangement are proper international agreements with capital, subscriptions, voting rules, access limits and conditions, and the Bank in particular has its own members, admitted under its own rules, who are not all members of the grouping: Bangladesh, Algeria and Uzbekistan are members of the Bank without being listed among the BRICS countries. The lesson is that the strength of an international arrangement lies in the instruments it produces rather than in the formality of the body that produces them.

3. Describe the New Development Bank and explain what is distinctive about its governance. The Bank was established by an Agreement signed at the sixth BRICS summit at Fortaleza in 2014 to mobilise resources for infrastructure and sustainable development projects in the BRICS countries and in other emerging market and developing economies. Its founding members are Brazil, Russia, India, China and South Africa; membership is open to members of the United Nations and to borrowing and non borrowing members alike; its headquarters are at Shanghai; and it has a Board of Governors, a Board of Directors, a President elected from one of the founding members by rotation and at least one Vice President from each of the others. Its initial authorised capital is 100 billion US dollars divided into one million shares of 100,000 dollars each, and its initial subscribed capital 50 billion dollars, of which 10 billion is paid in and 40 billion callable, reviewed by the Board of Governors at intervals of not more than five years.

What is distinctive is the rule in article 2 that the initial subscribed capital shall be equally distributed among the founding members and that the voting power of each member shall equal its subscribed shares. Each founder therefore subscribed 100,000 shares, worth 10,000 million dollars, and holds 18.72 per cent of the total, so that China, whose economy is several times India's or South Africa's, has exactly the same vote as South Africa. That is the direct opposite of the Bretton Woods institutions, in which voting weight follows economic weight. Article 8 completes the design by providing that no increase in subscription may take effect which would reduce the founding members' voting power below 55 per cent of the total, raise the voting power of non borrowing members above 20 per cent, or raise that of any non founding member above 7 per cent, so that the founders retain control, the lenders cannot dominate the borrowers, and no newcomer can grow into a second dominant shareholder.

4. Explain the BRICS Contingent Reserve Arrangement. The Treaty for the Establishment of a BRICS Contingent Reserve Arrangement was concluded at Fortaleza on 15 July 2014 between Brazil, Russia, India, China and South Africa. Its stated purpose is to establish a self managed contingent reserve arrangement to forestall short term balance of payments pressures, to provide mutual support and to strengthen financial stability, contributing to the global financial safety net and complementing existing international monetary and financial arrangements. Article 1 describes it as a framework for the provision of support through liquidity and precautionary instruments in response to actual or potential short term balance of payments pressures, so that in the language of balance of payments policy it is a financing measure rather than a corrective one: it does not cure a deficit but lends the foreign exchange to carry a country through one.

Its total committed resources are 100 billion US dollars, contributed as to 41 billion by China, 18 billion each by Brazil, Russia and India, and 5 billion by South Africa. Article 2 provides that until a request is made, acceded to and effected through a currency swap, each party retains full ownership and possession of the resources it commits, so that no money is ever transferred into a pool and the arrangement costs nothing to maintain. Article 5 sets access limits as multiples of each party's own commitment: China 0.5, Brazil, Russia and India 1, and South Africa 2, so that the largest contributor may draw least in proportion and the smallest may draw twice its contribution, making the arrangement deliberately redistributive. Of the maximum access, 30 per cent, the de linked portion, is available on the agreement of the providing parties alone, while the remaining 70 per cent, the IMF linked portion, additionally requires evidence of an on track arrangement between the requesting party and the International Monetary Fund involving a Fund commitment to provide financing based on conditionality.

5. Why is 70 per cent of the Contingent Reserve Arrangement tied to an IMF programme, when BRICS exists partly out of dissatisfaction with the IMF? Because lending to a country in a balance of payments crisis is not primarily a financial problem but a governance one. A country that cannot pay for its imports needs both money and a change of policy, and the money is wasted without the change; somebody must therefore set conditions, monitor whether they are met, and withhold the next instalment if they are not. None of the five founders wished to place itself in the position of telling another sovereign how to run its budget, its exchange rate and its monetary policy, since that is precisely the resented function which their criticism of the Fund is about, and doing it to one another would be corrosive of the very solidarity the arrangement exists to express. The International Monetary Fund already has the surveillance apparatus, the technical staff and the accumulated legitimacy, contested as it is, to perform that role.

The founders therefore made a distinction rather than a rejection. Thirty per cent of a party's maximum access, the de linked portion, is available on the agreement of the providing parties alone, which gives a member a genuinely independent first line of defence sufficient for a short and self correcting difficulty. The remaining seventy per cent requires an on track Fund arrangement, so that where a country's difficulty is deep enough to need large sums, the conditionality comes from the Fund and not from its neighbours. The Treaty says as much in its preamble, describing the arrangement as complementing existing international monetary and financial arrangements. The honest conclusion for an answer is that BRICS sought to change the governance of the international institutions rather than to escape them, which is exactly the programme of the 2001 paper that gave it its name.

6. Is BRICS an economic bloc? Give reasons. It is not, if by a bloc is meant an arrangement of the kind SAARC aspires to. BRICS has no free trade agreement among its members, no common external tariff, no trade liberalisation programme, no rules of origin and no dispute settlement mechanism for trade; it is not a customs union, a common market or a monetary union, and proposals for a common currency remain discussion rather than instrument. Nor is it an alliance: two of its members have an unsettled land frontier, and the foreign policies of the others diverge sharply. Its membership is also strikingly heterogeneous, containing the world's second largest economy and economies a small fraction of that size, major energy exporters and major energy importers, and States with very different political systems, which is precisely why deep integration of the regional kind is not available to it.

What it is, is a coordinating forum with two treaty institutions attached. Its members agree on one proposition and act on it: that the governance of the international economic institutions should reflect the present distribution of economic weight rather than that of 1944, which is the argument of the Goldman Sachs paper that gave the grouping its name. On that proposition the New Development Bank and the Contingent Reserve Arrangement are practical answers, since each is governed on terms its founders wrote. The comparison with SAARC is instructive and worth making in an answer: SAARC has a Charter, a Secretariat and a trade agreement but is paralysed by politics, while BRICS has politics but no trade agreement, and has nevertheless produced two functioning institutions. Formality is not the same thing as effectiveness.