BRICS Bank: learn how the financial mechanism that drives developing economies works

The New Development Bank (NDB) was created to finance projects on sustainability and infrastructure in the BRICS countries and offers an alternative to the traditional financial system. Understand its impact and relevance for Brasil and the world.

By Leandro Molina | leandro.molina@presidencia.gov.br 

The 2008 crisis revealed the fragilities of the global financial system and generated questions regarding the IMF and the World Bank. In this context, the BRICS emerged as a relevant group for the restructuring of the global economic order. Advocating for greater representativeness of developing countries, the bloc created initiatives such as the New Development Bank (NDB) to promote global financing alternatives.

This financial institution, known as the BRICS Bank, was officially founded in 2014 during the 6th BRICS Summit in Fortaleza, Brasil, and emerged as a pioneering initiative to bolster economic growth and sustainable development among the founding members of the BRICS — Brasil, Russia, India, China and South Africa. It is highlighted as an alternative to traditional multilateral institutions and a response to the need for long term financing for infrastructure and sustainable development projects in the countries that are part of the group, as well as other emerging nations.

The Fortaleza Agreement, signed in 2014, established the pillars of the bank, whose main objective is to mobilize resources for projects that promote sustainability and improve the quality of life for individuals. The NDB started functioning in 2016, with its headquarters located in Shanghai, China.

Since its foundation, the BRICS Bank has approved over USD 32.8 billion in financing for projects in Brasil, Russia, India, China, South Africa, Bangladesh, and Egypt. The highlights include initiatives such as the expansion of renewable energy networks in India, the development of railroad infrastructure in South Africa, and the strengthening of water supply systems in the Brazilian Northeast. The impact of the participation of emerging economies allows for the expansion of members, which can result in the expansion of the bank’s capital base, currently valued at USD 100 billion, and attract more global investments.

In Brasil alone, around USD 5.2 billion were destined for 31 projects. These actions tend to local demands and also contribute to global goals, such as the energy transition and measures to address climate change. Also in Brazilian terrain, the bank has already financed meaningful projects directed, for example, at strengthening the clean energy matrix through investments in solar and wind power plants. These initiatives increase national energy safety and position Brasil as a potential leader in the transition for a low carbon economy.

Strategic governance

Former-Brazilian President Dilma Rousseff assumed the presidency of the NBD in March 2023. She was nominated by the current president of the country, Luiz Inácio Lula da Silva. The governance of the bank is based on a Governing Council, a Board of Directors, and an executive team composed by one president and four vice presidents, representing the five founding countries. The presidency rotates to ensure equitable participation of all members in the institution’s leadership.

During President Dilma Rousseff's inauguration ceremony ahead of the NDB, President Lula highlighted the historical relevance of having a woman assume the leadership of a large global financial institution. Lula recalled Rousseff’s trajectory as a leader who fought for social justice and emphasized that the bank was established to be an essential tool to reduce inequality among rich and developing countries.

The Brazilian president underscored the bank’s role in expanding financing for strategic projects in areas such as infrastructure, sustainability, and climate change adaptation without the imposition of conditionalities that is experienced with traditional banks.

“The establishment of this bank demonstrates that union among emerging countries has the potential to promote significant social and economic changes globally. We do not aim to be better than anyone, but to ensure opportunities to expand our potentialities and offer dignity, citizenship, and quality of life to our populations,” he declared.

BRICS relevance and the role of the NDB

Professor Evandro Menezes de Carvalho, International Law expert and professor at Universidade Federal Fluminense (UFF) and Fundação Getúlio Vargas (FGV-RJ), underscores the growing relevance of the BRICS in the global scenario. With the entry of new members such as Egypt, the United Arab Emirates, Ethiopia, Iran, and Indonesia, the bloc now represents around 41% of the world’s population and 37% of global GDP in purchasing power parity. According to the professor, this representativeness strengthens the legitimacy of the BRICS in international decisions, particularly in discussions regarding the global governance reform. 

“The BRICS has demonstrated its relevance through meaningful initiatives, including the recent expansion of full and associated members, as well as the growing interest of other countries in becoming part of the bloc. Since its inception, the BRICS has positioned itself as a reforming agent of global governance. Its central objective is to reform international organizations, seeking to expand the participation of emerging countries in decision-making processes. This demand for greater representation is expressed in every one of the group’s summit declarations,” notes Professor Carvalho.

The New Development Bank is highlighted as the BRICS' main initiative. Established to address the need for long-term financing for infrastructure and sustainable development projects, the NDB distinguishes itself by not imposing the conditionalities typical of institutions such as the IMF and the World Bank. According to the FGV expert, the bank is known for its agility in granting loans and its focus on projects that promote green development and social inclusion.

Despite its recent growth, the NDB faces challenges such as the need to expand its membership base and increase its global influence. The recent accession of Bangladesh, Egypt, and the United Arab Emirates underscores its ambition to become a key player in the international financial system. With a robust governance model, the bank has the potential to play a crucial role in transforming emerging economies by expanding access to financing for strategic projects.

Professor Carvalho also emphasizes the BRICS political agenda, which seeks to reform global governance to increase the representativeness of developing countries in financial institutions such as the IMF, the World Bank, and the UN. To consolidate its role, the professor says, the BRICS needs a minimum of institutionalization, including a permanent secretariat to ensure the transparency and continuity of the group’s decisions. This would help strengthen its legitimacy and avoid critics that state that the bloc acts as an anti-Western organization. 

The NDB has been consolidating as a development bank aligned to the BRICS priorities, with a growing focus on sustainable financing, green technology, and resilient infrastructure.

Carvalho highlights that the BRICS is not just an alliance of emerging countries, but a coalition that seeks to transform global governance through the promotion of greater inclusion and economic balance. The NDB, on the other hand, is the materialization of this goal, offering a viable alternative to the traditional financing model. With a strengthened structure well positioned in the international scenario, both the BRICS and the NDB can bolster a more just and representative economic system for emerging economies.

Strategic importance for Brasil

To Brasil, the New Development Bank represents an invaluable opportunity to finance infrastructure projects, leveraging economic growth and promoting sustainable solutions. Brazilian companies also benefit through their participation in bids for projects financed by the bank, expanding their presence in international markets.

The NBD is positioned to play a crucial role in the transformation of emerging economies. By promoting collaboration among its members and offering innovative financing solutions, the bank paves the way for a more inclusive future to expand its scope of action, with an emphasis on green financing, sustainable technology, and resilient infrastructure. Projects related to energy transition, such as investments in renewable energy, have the potential to attract over USD 2 trillion in contributions by 2030.

Moreover, the bank has been investing in the emission of green bonds, promoting sustainable financing with reduced exchange risk for local investors. This strategy contributed to the diversification of resource sources and the expansion of the impact of financed projects.

The New Development Bank is also regarded as a key player in the transition to a new multipolar economic order. This strategy positions the NDB as a driving force for inclusive and sustainable development, strengthening emerging economies and promoting greater balance in the global landscape.