House of BRICS

Jordan Fraade
Jul 15, 2014 19:17 UTC

The BRICS nations are holding their annual summit this week in Fortaleza, Brazil, and the biggest item on the agenda is the creation of a joint development bank. While all five BRICS countries have pledged to contribute to the $100 billion development bank as well as a reserves fund, China and India are both gunning to be the nation that hosts the institution. Indian trade minister Nirmala Sitharaman made a strong push for his country, saying, “Any city in India has its natural advantages, English-speaking, very skilled manpower, and…India is very centrally located.” Still, there’s no doubt that one country is the real economic powerhouse in BRICS: China.

This Reuters graphic gives some insights into the BRICS numbers.

In terms of both GDP and total reserves, the chart shows that China is the only one of the five nations that has been on a consistent upward trend since 2005, with no dips for the global recession. Its GDP is over four times that of Brazil, the BRICS country with the next-highest GDP, and it has eight times as much reserve currency as Russia, its closest competitor. This has put it in a unique position to make deals and direct trade, according to Reuters, which also reported that China’s President Xi Jinping invited India to become a founding member of the Asian Infrastructure Investment Bank.

Xi also invited India to an APEC summit in November, bringing the South Asian country closer to its longtime goal of joining the trade organization.


Very informative.

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Argentina leads the emerging markets ‘bloodbath’

Jan 24, 2014 16:30 UTC

The Argentine peso had a terrible day on Thursday, falling 11% against the dollar. It was the worst day since the country’s 2002 financial crisis. In fact, there’s a broader rout in emerging markets going on.

This week, the Argentine central bank “gave up its battle against the peso’s decline” as foreign reserves sank lower, according to Reuters. Here’s what those reserves look like: 

Here’s more from Reuters about what’s going on inside the country:

Due to local currency controls, the black market is the only way for many Argentines to get their hands on dollars as confidence in Latin America’s No. 3 economy falls and inflation soars. Given the country’s history of repeated financial crises, Argentines like to save in dollars.

According to private analysts, consumer prices rose more than 25 percent in 2013, although discredited official data clocks inflation at less than half that.

Unorthodox policies, from currency controls meant to stop capital flight to heavy stimulus spending unencumbered by inflation targeting, have made Argentina a no-go zone for all but the most risk-hungry investors.

Earlier this week, the BBC reported that the government has restricted online shopping in an attempt to bolster its foreign reserves. Argentinians now have to “sign a declaration and produce it at a customs office, where the packages have to be collected,” for any item purchased on an international website (such as Amazon).

Argentina had the worst day, but it isn’t isolated. Sam Ro writes that there is an “emerging currency market bloodbath”. Morgan Stanley’s Rashique Rahman told Ro he doesn’t see any one cause for the currency drops. Here’s the Business Insider chart of EM currencies against both the dollar and the euro (via Bloomberg and Morgan Stanley):






Everybody thought that QE was holding down interest rates… It wasn’t. It was propping up emerging markets and equities…

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