BRIC steers clear of dollar talk

YEKATERINBURG, Russia – The leaders of the world’s biggest emerging markets demanded a greater say in the global financial system on Tuesday at their first summit, but steered clear of any assault on the US dollar’s dominance.

The summit of the so-called BRIC nations of Brazil, Russia, India and China ended with a short statement by Russian President Dmitry Medvedev and a communique that demanded more power for developing nations in international financial institutions and the United Nations.But it did not mention two key Moscow initiatives – a smaller role for the dollar and a supranational reserve currency, although a Russian delegation source told Reuters that BRIC finance ministries and central banks were tasked to work on reserve currencies proposals.’We are committed to advance the reform of international financial institutions, so as to reflect changes in the world economy,’ the BRIC countries said in a joint communique.’The emerging and developing economies must have a greater voice and representation in international financial institutions,’ it said. ‘We also believe that there is a strong need for a stable, predictable and more diversified international monetary system.’In the run-up to the summit, the Kremlin said the agenda would include the need for more reserve currencies and the expansion of the International Monetary Fund’s Special Drawing Rights, or SDRs.But China – which holds nearly US$2 trillion in foreign currency reserves – was silent, indicating little unity on any potential challenge to the greenback. With its massive holdings in US dollars and Treasury bonds, Beijing does not want to see the value of its investments go up in smoke.’Do not expect any short-term initiatives with respect to the dollar,’ Roberto Mangabeira Unger, Brazil’s minister for strategic affairs, told Reuters after the summit.’Everyone is concerned about the delicacy of this issue,’ he added. ‘No one wants to say things or do things that would increase volatility in the circumstance of the crisis.’Analysts say the BRIC four are united by strong economic growth in recent years but not much else. Their political standpoints and global priorities differ widely and diplomats question whether the forum can forge strong, united positions.The US dollar fell across the board on Tuesday, pressured by the comments from Russia suggesting a need for a global reserve currency other than the greenback.’The existing set of reserve currencies, including the US dollar, have failed to perform their functions,’ President Medvedev told a news conference in the Russian city of Yekaterinburg, ahead of the BRIC summit.’We will not do without additional reserve currencies,’ he said, adding that a new supranational reserve currency was also an option as the IMF’s SDRs gained a bigger role.Medvedev’s chief economic aide, Arkady Dvorkovich, called on the IMF to expand the basket of SDRs to include the Chinese yuan, commodity currencies such as the Russian rouble, Australian and Canadian dollars as well as gold.The SDR is an international reserve asset allocated to member countries with its exchange rate determined by a basket of currencies, at the moment including the dollar, euro, yen and sterling. A review of the basket is due in November 2010.’The world economy will grow … In the future we are sure growth will resume. This growing pie should be divided in a fairer way. We are not talking about excluding the dollar but the share of other currencies should increase,’ Dvorkovich said before the meeting.BRIC leaders would discuss investing their reserves in each other’s currencies, settling bilateral trade in domestic currencies and striking currency swap agreements, he said.-Nampa-Reuters