To boost trade within the BRICS countries, the development banks of Brazil, Russia, India, China and South Africa on Thursday signed two agreements for providing credit facility in local currencies and for facilitating confirmation of multilateral Letter of Credit.
The Export-Import Bank of India, China Development Bank, Russia’s Vnesheconombank, Brazil’s Banco Nacional de Desenvolvimento Economico e Social and Development Bank of South Africa signed two agreements after leaders of the five nations met here for the fourth BRICS summit.
“The agreements will serve as useful enabling instruments for enhancing intra-BRICS trade in coming years,” Prime Minister Manmohan Singh said. He and his counterparts – President Dilma Rouseff of Brazil, President Hu Jintao of China, President Dmitry Medvedev of Russia and President Jacob Zuma of South Africa – were addressing media-persons after the chiefs of the five development banks signed the agreements at the end of the plenary session of the BRICS summit.
The master agreement on extending credit facility in local currency is intended to bring down demand for fully convertible currencies for transactions among the BRICS nations and thus help lessen transaction costs in intra-BRICS trade.
The multilateral letter of credit confirmation facility agreement envisaged confirmation of the L/Cs upon receipt of a request from the exporter or the exporter’s bank or indemnifying party or the importer’s bank. The deal is intended to help lessen trade transaction costs apart from promoting intra-BRICS trade.
The intra-BRICS trade registered a 10-fold rise in the past decade, from $ 55 billion in 2001 to $ 569 billion in 2010. The share of intra-BRICS exports in the five nations’ total exports to the world increased to 8.6 per cent in 2010 from 4.3 per cent in 2001. The intra-BRICS imports accounted for 15.9 per cent of the bloc’s total import from the world in 2010 – a steep rise from 8.1 per cent in 2001.
“With our nations providing the much-needed momentum to world trade, facilitation of trade finances as a secured mode of financing, both long and short terms, is crucial to provide fluidity to the movement of goods and services,” T C A Ranganathan, Chairman-cum-Managing Director of the EXIM Bank of India, said. “The objective is to reduce the demand for hard currencies as also the cost of borrowings and currency conversion,” he said.
