BRICS Bank Issues Green Bonds

Gerry Brady March 7, 2019 8 No Comments

The BRICS New Development Bank, based in Shanghai, has just issued Chinese Yuan denominated Bonds to raise 3 Billion Yuan. This money will be used for infrastructure and sustainable development projects in emerging economies. They are called “green” bonds.

The BRICS Bank was established in 2014 and formally opened for business a year later. The bank’s capital is up to $100 billion and it says all members of the United Nations can join it. However, BRICS nations can never have less than 55 percent of the voting power. The BRICS nations are China, Russia, Brazil, India, and South Africa and each nation has an equal shareholding. As of August 2018, the NDB Board of Directors had approved 23 projects with loans aggregating over US$ 5.7 Billion.

The bank did a similar sized “green” bond issue in 2016. It intends to continue issuing financial products denominated in the local currencies of its member nations.

Don’t get too excited yet. Three Billion Yuan sounds like a lot for “green” projects but it is only US$ 447 Million — almost half a Billion US Dollars. However, last September, they approved three infrastructure and sustainable development projects in India and Russia with loans aggregating US$825 million. So, taken as a whole, this means that the BRICS bank has now embarked upon financing almost US$ 2 Billion of such projects in emerging nations. It is a small start but a significant one. If they finance projects in the currency of the target nation, then the nation can pay the loan back with their own currency. This is a major advantage.

This is very different model to the World Bank based in Washington DC which predominantly makes loans denominated in US Dollars, extending the reach of the US Dollar empire. The target nations have to repay those loans with US Dollars and this exposes them to foreign exchange risk. This has been the system since 1944 when the World Bank was formed at the Bretton Woods meeting in New Hampshire.

While the bulk of World Bank loans are issued in US Dollars, they can issue loans sometimes in Euro, Japanese Yen or Pound Sterling. They can also sometimes issue in other currencies as well, including those in the Dollar bloc (Australian, New Zealand and Canadian Dollars). But, this is not the norm. The US Dollar reigns supreme as far as the World Bank is concerned.

Health Statistics

Life expectancy is the critical measuring device for determining overall health outcomes. After all, anyone who is alive is clearly healthier than someone who has just died at the same age. Being alive is the ultimate health measure. “It is better than the alternative” say some wise people. A very interesting report on health outcomes in various nations was just released by Bloomberg. The Top 10 nations were — Spain, Italy, Iceland, Japan, Switzerland, Sweden, Australia, Singapore, Norway and Israel. The United States came 35th, well down the list surrounded by nations such as Costa Rica and Lebanon. Cuba came in at 30th, above the US.

The article makes interesting reading —

Bloomberg 2019 Healthiest Country Index — the index grades nations based on variables including life expectancy while imposing penalties on risks such as tobacco use and obesity. It also takes into consideration environmental factors including access to clean water and sanitation.”

In economics, things work until they don’t. Until next week.


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