A New BRICS Wall?
Perhaps a pure coincidence, but just when Draghi was being questioned about a coordinated G10 response to any crisis in Emerging Markets, headlines hit the wires confirming that the BRICS nations would ‘commit $100bn to a FX fund’ to deal with such contingencies. Unlike the much-maligned BRICS rescue fund for the Eurozone, which never got going, this new vehicle, which pools the five countries’ reserve assets, is designed to have more teeth and should complement the BRICS development bank which is also in the works. Yet, financial reality always trumps political symbolism. Size is a problem, the capacity of Emerging Market coordination has never been truly tested, and such a vehicle will do little to challenge dollar’s pre-eminence in financial intermediation or crisis resolution.
Read the full report: UBS