Brics wants to borrow in real against dependence on the dollar – 08/22/2023 – Market

The president of the Novo Banco de Desenvolvimento (NDB), the official name of Banco dos Brics, Dilma Rousseff, said that the bank plans to lend in the South African and Brazilian currencies as part of a plan to reduce dependence on the dollar and promote a financial system internationally with other protagonists.

Rousseff also stated that the Shanghai-based bank is evaluating the membership applications of around 15 countries and should probably approve the entry of four or five. She declined to name the countries but said it was a priority for the NDB to diversify its geographic representation.

“We hope to lend between US$ 8 billion and US$ 10 billion this year”, said Dilma, in an interview with the Financial Times. “Our goal is to reach about 30% of everything we lend … in local currency.”

She said the NDB would issue rand debt for loans in South Africa and would do “the same thing in Brazil with the real. We will try to do a currency exchange or issue debt. And also in rupees.” The bank already lends in renminbi.

The expansion of local currency lending supports a larger goal agreed upon by the Brics nations to encourage the use of dollar alternatives in commercial and financial transactions.

The BRICS nations – Brazil, Russia, India, China and South Africa – created the NDB in 2015 as an alternative to US-dominated financial institutions such as the IMF and World Bank.

The NDB has lent $33 billion for infrastructure and sustainable development projects and has added Egypt, Bangladesh and the United Arab Emirates (non-BRICs nations) as additional members, with Uruguay in the final stages of admission.

The former Brazilian president said local currency loans would allow borrowers in member countries to avoid currency risk and fluctuations in US interest rates. “Local currencies are not alternatives to the dollar,” she said. “They are alternatives to a system. So far, the system has been unipolar … it will be replaced by a more multipolar system.”

The BRICS bank has also tried to distinguish itself from the World Bank and the IMF by not imposing lists of policy conditions on loans. “We repudiate any type of conditionality”, stated the president of the NDB. “Often, a loan is given on condition that certain policies are implemented. We don’t do that. We respect each country’s policies.”

Despite its intent to provide an alternative to the US-based financial order, the NDB was forced to suspend all operations in member country Russia to avoid sanctions and exclusion from the international financial system. “You can’t deny that [o sistema financeiro internacional] exists”, Dilma admitted. “You have to live with it.”

Ratings agency Fitch downgraded the NDB’s debt from AA+ to AA last year, with a negative outlook, given the bank’s exposure to Russia, saying it “could face challenges issuing a long-term bond in the capital markets”. from the USA”.

This was due to the image risks associated with its partly Russian ownership structure, the ratings agency said, with Moscow holding 19.4% of equity at the end of 2021. Fitch revised the NDB outlook to stable in May after the bank was able to issue a $1.25 billion green bond, but it did not restore its AA+ rating.

Rousseff said she believed the bank had plenty of room to grow, stating that, at seven years old, it is the youngest of the world’s development banks. “We are going to transform ourselves into an important bank for developing countries and emerging markets,” she said. “Our focus should be this: a bank made by developing countries for themselves.”