Key highlight: The new BRICS Contingent Reserve Arrangement

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Nov. 24 2019, Updated 11:56 p.m. ET

Another highlight of the Summit was the Contingent Reserve Arrangement – a reserve pool worth 100 billion USD to be set aside for liquidity measures and crisis protection – which will work in tandem with the NDB.

This adds to other agreements like the Memorandum of Understanding on Cooperation, the Cooperation Agreement on Innovation, the BRICS Interbank Cooperation Mechanism, the BRICS Business Council, the BRICS Banking Forum, and the BRICS Exchanges Alliance. Putin has also proposed an energy independence scheme for the BRICS, including a pooled fuel reserve and a joint policy-making institution. Are you sensing the theme yet?

Market Realist – The graph above shows you the proportion that each founding country will contribute to the Contingent Reserve Arrangement. China (FXI) will contribute $41 billion, Russia, Brazil (EWZ), and India (EPI) will contribute $18 billion each, and South Africa will contribute $5 billion.

The idea spurring the creation of the CRA is to reduce dependence on the West and create a world that’s financially independent and multi-polar.

According to the Fortaleza Declaration, the BRICS stock alliance too has been formed to ease the way for investors keen to invest in emerging markets (EEM)(VWO).

All these measures—if efficiently executed—should make BRICS a cohesive force to reckon with.

Read on to the next part of this series to learn about the long-term prospects for BRICS.

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