The BRICS Contingent Reserve Arrangement treaty

The treaty signed by the BRICS CRA was signeFortaleza, Brazil. Brazil, Russia, India, China and South Africa came together and adopted the acronym, BRICS. The official language of communication was agreed to be English. The treaty was meant to offer mutual financial assistance to the member countries. The treaty had it that the member countries could be assisted through provision of liquidity on time to the country that needed it. The liquidity would be provided by the other member countries based on balance of payments pressure of the individual country. This would be marked by a decrease in the rate of foreign exchange, shortage of short-term liquidity, and other challenges in finances.

The treaty specified that the formation of the BRICS CRA would be implemented on the major concrete ingenuity of the member states. In addition, it specified that the arrangement development would positively influence the member states since it is a preventive measure. In addition, it would contribute in the strengthening of financial stability to the countries. Each country was to access funds based on its financial multiplier. The parties entered an inter-central bank agreement to come up with procedures and guidelines of lending out funds.

The initial commitment resources of CRA would amount to USD 100 billion, with China having the highest commitment of USD 41 billion. The parties were allowed to access the resources that they devoted to the development when thy needed, upon request and fulfillment of certain conditions, and when the other parties agreed. However, the assets reserved by the states cannot be accessed until the requirement decision is made by the Standing Committee of the arrangement, which has representation from the five member states. The treaty gave an opportunity for prompt decision-making, meant to protect the member countries from financial embracement.

Reference

VI BRICS Summit (2014). Treaty for the Establishment of a BRICS Contingent Reserve Arrangement-Fortaleza, July 15. Retrieved on 6^th May, 2015, from:   http://brics6.itamaraty.gov.br/media2/press-releases/220-treaty-for-the-establishment-of-a-brics-contingent-reserve-arrangement-fortaleza-july-15