The New Development Bank (NBD), known as the Bank of Brics, announced this Thursday the entry of three new partners, which starts its expansion: Uruguay, the United Arab Emirates and Bangladesh.
O Value found that this year the negotiation for the adhesion of one more partner should be concluded. The expectation is three to four new members per year, reaching a total of 20 members in the coming years.
“The expansion of the NBD’s corporate structure is in line with the bank’s strategy of positioning itself as a reference institution for the development of emerging economies,” the bank said in a statement.
The percentage of new partners in the bank’s capital will depend on the next rounds of expansion. What is certain, however, is that, even with long-term dilution, the founding countries — Brazil, Russia, India, China and South Africa — will have 55% of the control of the bank headquartered in Shanghai (China) and currently chaired by Brazilian Marcos Troyjo.
“The new partners will have an important platform in the NDB to foster cooperation in infrastructure and sustainable development,” said Troyjo. “We will continue to expand the number of partners in a gradual and balanced way.”
Uruguay, United Arab Emirates and Bangladesh represent an interesting combination, with good ratings and good economic prospects, which help Banco do Brics.
The United Arab Emirates is currently one of the main liquidity centers in the world. And they can become a more important source of private capital for infrastructure investments, helping to set up the bank’s investment projects with different institutions from other partners.
The Adia fund (Abu Dhabi Investment Authority), for example, has US$ 650 billion in assets. The Investment Corporation of Dubai (ICD) has US$ 302 billion. The Mudabala fund, one of the most active abroad, totals US$ 232 billion. The Emirates Investment Authority (EIA) has assets of US$ 68 billion.
For Obaid Humaid Al Tayer, Minister for Financial Affairs of the UAE, admission to the NBD “represents a new step towards expanding the role of the UAE in the global scenario, especially in light of the country’s broad capacity and experience in the support for infrastructure and sustainable development projects. This significant step would not have been possible without the vision and guidance of the leadership of the United Arab Emirates, who believe in the importance of supporting development projects around the world, especially in emerging economies.”
As for Bangladesh, the assessment is that much of the world has not yet realized its potential. it is the fastest growing country on the fastest growing continent, which is Asia. It was one of the fastest growing economies in the last decade, and for the next decade it is expected to grow by 8% a year, which means doubling income in this period. Its per capita income (US$1,968 in 2020) is higher than that of Pakistan (US$1,193) and India (US$1,900), its neighbors, and 98% of children have completed basic education.
“Bangladesh’s admission to the NBD has paved the way for a new partnership at an important moment in the celebration of the 50th anniversary of our independence,” said Mustafa Kamal, the country’s finance minister.
Uruguay has a good risk rating, which helps Banco do Brics. This year, the rating agency Moody’s reaffirmed the country’s rating at BAA2, with a stable outlook. According to the agency, the perspective reflects the “prudent fiscal management during the pandemic”, which limited the increase in debt levels and will lead to the stabilization of coefficients in the coming years in the country. The country has a higher per capita income than Chile. Its participation in the bank will also make it possible to carry out binational projects with Brazil with financing from the NBD.
“Uruguay sees in the NBD a great opportunity for cooperation with its member countries, seeking better international insertion for the country’s trade and investments,” said Azucena Arbeleche, the country’s Minister of Economy and Finance.
The question is why Argentina, one of the emerging in the G20, does not join the Bank of Brics. The list of countries with which the bank is negotiating to be partners is agreed upon in advance by the institution’s board of governors. Valor found out that Argentina is not on the list with prospects for negotiation.
In fact, for the institution itself it may be more important to have Peru, Colombia and Guyana as partners, at least for the moment. The relative size of the economy is not the only criterion. There are other points that can weigh more, such as risk rating and liquidity sources. Last year, the Argentine rating went from “default” (SD) to CCC+ after completing the external debt restructuring.
In six years of operation, Banco do Brics has approved around 80 projects in its member countries, with an investment portfolio of US$ 30 billion (approximately R$ 160 billion). Areas such as transport, water and sanitation, clean energy, digital infrastructure, social infrastructure and urban development are within the scope of the institution.
The NBD was created by Brazil, Russia, India, China and South Africa, aiming to mobilize resources for infrastructure and sustainable development projects in the BRICS and other emerging economies and developing countries, complementing the performance of multilateral and regional financial institutions for the global growth and development. The bank has an authorized capital of US$100 billion, open for subscription by members of the United Nations (UN).