Dilma Rousseff, President of the BRICS New Development Bank and former President of Brazil, flew into Johannesburg, South Africa, with Brazilian President Lula da Silva yesterday. Lula posted a government video clip of his reception at the airport by South African Foreign Minister Naledi Pandor and her welcoming committee. It had very few subtitles, but included was the statement that using local currencies for transactions is on the agenda of the BRICS Summit.
Rousseff indicated the NDB’s plans in this regard, in an interview with the Financial Times published today: “We expect to lend between $8 billion and $10 billion this year. Our aim is to reach about 30% of everything we lend … in local currency.” To do this, the NDB will issue rand-denominated bonds in order to then lend in the South African currency, and do “the same thing in Brazil with the real. We’re going to try to either do a currency swap or issue debt. And also in rupees [in India],” she explained. The bank has already issued debt in Chinese renminbi and made loans in that currency.
This incipient plan of the NDB to capitalize itself outside the dollar-dominated speculative financial system is crucial to break free of that system’s stranglehold. Since its founding in 2015, the NDB has lent only $33 billion—about $3.5 billion per year—and it has capitalized itself almost entirely in dollars. That is now changing, and Rousseff’s plan to lend $8-10 billion this year also represents a major expansion of activities. She also reported that the NDB was considering applications for membership from about 15 countries and was likely to approve the admission of 4 or 5.
Rousseff pointed out that nations need to protect themselves from exchange-rate risk, and variations in U.S. interest rates. “Local currencies are not alternatives to the dollar. They’re alternatives to a system. So far the system has been unipolar … it’s going to be substituted by a more multipolar system.”
And unlike the IMF and World Bank, “We repudiate any kind of conditionality. Often a loan is given upon the condition that certain policies are carried out. We don’t do that. We respect the policies of each country…. We’ll transform ourselves into an important bank for developing countries and emerging markets. Our focus has to be that: a bank made by developing countries for themselves.”
She acknowledged that the NDB has been forced to suspend all operations in member country Russia, to avoid being sanctioned and cut off from the international financial system. (https://www.ft.com/content/1c5c6890-3698-4f5d-8290-91441573338a)
Reflecting this bold policy, on Aug. 21 the NDB signed a loan agreement with the Trans-Caledon Tunnel Authority (TCTA) for the implementation of Phase II of the Lesotho Highlands Water Project. The NDB will provide a project loan of R3.2 billion South African rand ($170 million) to TCTA under the sovereign guarantee of South Africa, according to the NDB website.
The Lesotho Highlands Water Project is a multi-phased project to provide water to the Gauteng region of South Africa and to generate hydro-electricity for Lesotho. It was established by the 1986 Treaty signed by the governments of the Kingdom of Lesotho and the Republic of South Africa. The project entails harnessing the waters of the Senqu/Orange River in the Lesotho highlands through the construction of a series of dams for the mutual benefit of the two countries. Phase I of the project was inaugurated in 2004, and Phase II is currently underway. The project will increase the yield of the Vaal River Basin by almost 15%, and will support economic growth and foster livelihoods of people of the highly urbanized province of Gauteng, South Africa, which includes the nation’s administrative capital of Pretoria, and the provincial capital of Johannesburg. (https://www.lhda.org.ls/lhdaweb)
