apparent problem with the iran nuclear talks and the ongoing situation with israel and gaza, and a meetings involving the immigration progress. we'll keep you posted on whatever he has to stay. i'm david shuster, right here on al jazeera. . >> they are the emerging world powers and they're combining their economic hats. the bricks alliance hopes to challenge the western dominated world bank and international monetary fund. it's the inside story. >> hello, i'm a he libby casey. brazil, russia, india and china

and south africa today they make up a fifth of the world gdp, and they're working together. they're launching their own development and rainy day fund. it's a major shift in the western-led status quo. they say they'll be responsive to the needs of developing economies but can they overcome their stark differences to work together and what does it mean for the united states and their sometimes confine shoes relationships with thescontentis relationships with these nation nations. >> the historic dimension of our summit can be demonstrated by the importance of the agreements we sign. >> head quartered in shanghai, they have a commitment of

$100 billion. and it's capital will be divided among the five members the first president will be from india. the board of directors will be led by brazil and the africa region lending branch will be based in south africa. >> the bricks bank will be one of the biggest financial agencies in the world. >> bricks nations see their bank as counter to what they view as western-dominated financial order and a means to provide security investment and growth resources to themselves and other emerging nations. the countries have long argued for more of a say in the global system. they chafed a the way had a lenders at the world bank and international monetary fund or imf put restrictions on the countries they help. after feeling they have not been heard bricks say its time for change. >> we'll put pressure for reform. unless they reform and takes bricks nations into account

more, i think this constitutio institution will be more dominant in the bricks countries. >> reporter: the world bank acts as a world provider for developing countries. it's twin goals is to end poverty and promote prosperity. established after world war ii the imf said its fundamental mission is to insure stability in the global system. it lends to countries with pavement difficulties, but imf loans are not free money and their help comes with strings. take ukraine. the agency approved a $17 billion package in april, but on the condition that the kiev government follow strict economic reforms like raising taxes and energy prices. bricks advocates say they will be different, but some economists are skeptical of its ability to compete in an already established arena. >> they are not ready. they are risking a lot. they're risking the progress they have in the last ten years

for a project that will not render the benefits they think they will have. >> the bank is looking to provide loans for infrastructure and development projects building up other emerging economies. officials say it could be two years before it starts lending. and there's the possibility that other countries such as turkey, mexico, and indonesia could join later. >> we should push forward with our cooperation and establish the contingency reserve arrangement as soon as possible. >> 42% of the world's population live in the bricks nations today making up 20% of the world's gdp it' gdp. it's a major moment. they all have huge economic potential. at the same time bricks nations have unique and varying interests that are often at odds with washington. >> a new player in the global

aid scene, what impact will it have and dna issues spurred its creation and where does it put its efforts o on the world stage? here to talk about it from our washington studios our guests. professor, we'll start with you. why are these countries striking out on their own? >> well, for a long time these countries have deserved a greater voice at the imf in the world bank. those institutions claim to give voter rights according to the presence of the size of the economy in the world.

china is currently ranked sixth in voting strength at the imf. but we know that it's economic presence in the world ranks second and soon may surpass the size of the united states. it's been a long time that we should reform the votes at the imf and the world bank, and these countries didn't get what they were supposed to a long time ago. >> and take us back into the history. how has this not reached adequacy from these countries. we received assurances from christine la guard as she was ankling to become head of the imf for these emerging economies, how have we gotten here? >> it's taken a long time for the shares and the seats and the counts that would be give out. primarily the european countries have been reluctant to do so. but most recently it has been

the united states congress that has not approved of the reform that were agreed in 2010. this is a direct protest against the united states rather than the european. >> how do you see theocracy of the world bank and imf with what bricks is doing? >> the new development bank, as they call it, it's pretty much a parallel to the world bank. but we also have four regional development banks and the china development bank far has given. in this area there are lots of banks, and it's nice to have one more. it's not dramatic. while there arrangement is not really a competitor. it's supposed to be $1 billion.

you don't know how they can be available. you don't know how it can be activated. and the u.s. on its own put up hundred billion dollars in credit swaps to western countries, not for the bricks countries. you can't say that this is comparatively small by that comparison, it's nothing what the imf does in its programs. >> let's bring you in on the conversation, what do you see as the major motivation for these countries striking out on their own and forming a world bank, a lending agency, and also an imf, sort of a protective rainy day fund? >> i think there are at least two first run related to the fact that they're ending now the first cycle of brick summit that was started in 2009. and it was a pressure to deliver

something concrete. the second die mention i dimension relates to the reform of the financial institution. as we discussed already, bricks as a group was created in 2008 for these reforms. so far nothing has happened besides promises that wasn't realized in real life. so the second dimensions related to the pressure over the international financial institutions in order to make

strong this claim for reforms. but i do think there is a third dimension that should not be neglected, which is related to the fact that these institutions, at least the new development bank, as it is called, will offer an alternative for developing countries in terms of financing infrastructure projects, energy projects and other projects in the developing world. they would not follow the world banks guidelines. >> let's pick up on something that we heard from paolo estev estevez. it was form back in 2009. south africa was not part of it then. they are now. how important is it to say that

they'll start lending money b by 2016. >> it's important to say that they did something. if they didn't decide this they wouldn't have any institution. they have been discussing these two things for five years now. so they need to get it done otherwise it would just look like clients. we have many such clients. we have g-7, previously g-8. >> does a new development bank threaten the power structure? >> it does not threaten them y

yet. there is a fund called the chang mai initiative. >> no one has borrowed from it. >> all the political problems that the imf faces are going to be faced by these other banks as well. the chang mai initiative could not come to an agreement with their loans. so what did they do? they said if you want to borrow from chang mai, you have to adhere to the imf. and they have passed it to the imf. the bricks have started out with an interesting plan. all members are equal. they each give $10 billion.

they get equal vote shares but they're not really equal, right? china's economy is two orders of magnitude larger--not quite yet but soon will be two orders magnitude larger than south africa. these are not equal partners, and at some point china will have to take the lead for the bank to be effective. >> we'll come back and talk about the agenda of these countries, like brazil, russia and china and how they may differ. you're watching "inside story."

>> welcome back to inside story. i'm libby casey. we're expecting president obama to speak from the briefing room in just a few moments. when that happens we'll break from programming and bring you the president live. lear on "inside story" we're talking about a new development bank that could shake up the status quo in international lending. it's bricks for abou for these five countries. when we left off you were talking about these contradictory interests these countries will have as well as power differences. do they have a shared enough

agenda? is it big enough for the world to hold them together? >> i think its enough to hold them together as a group. i'm not sure that it's enough to inspire them to really do much. what they have in common is dissatisfaction with the status quo. china has never been under the imf program. it's exceptional in the developing world and they're the real powerhouse. i think for bricks to be effective they'll needs a leader. an until they see a country ready to step up in that leadership position they'll have a hard time accomplishing much.

how are they going to deal with that that? >> yes, there are big problems here. iraq is the most anti-western country today. you could say that russia's primary interest is to stand up to the united states. it needs support and do something against the sanctions. china is in the big picture here. china has an opportunity to play multi lateral, and the question is whether it will be able to do as suggested. brazil and abou and india, they have very few interests in common with russia and china. >> how are these country going to benefit themselves with that

lateral effort. >> i do think that every single country benefits from being at the bricks it was a clear sign of the dissatisfaction of the russians regarding the international order and regarding the presence of n.a.t.o. or the e.u. and what they consider still being their zone of influence. brazil and south africa probably benefits from being a brics country for the projection of

these countries. for china, bricks is a way to lose a little bit its footprint in the international system. >> it's a completely different story, and it would be difficult

for these countries to come together with what the development means. they did launch a new development bank, but we are still not--we don't know yet what they understand by development. >> is it significant that they've gotten this far? there were debates a couple of years ago if they could even gray on a commo--agree on a common currency and get common agreements on the table. >> exactly. they have made agreements. >> we'll take a short break and when we continue our conversation we'll talk about the brics development bank and

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>> welcome back to "inside story." the five brics countries have 40% of the world's population and in economic terms they are a growing powerhouse. they have teamed up to create a new development bank. how does this change the international lending game, and what challenges does it pose for the united states and western countries? still with us in our washington studios our guests. let's ask you something that you've been bringing up a lot. how will these loans develop, and how will the competing interests of all these countries be able to agree upon some of

the basic perimeters? how will they get there? >> that is still a question to be answered. the location and the theme of choosing the presidency, the border and so on and so forth. but the main question is still what these countries understand. what is the understanding of what development is about. we don't know that yet. as far as we know, the banks lend money to infrastructure projects abroad using their own

using their own companies for the infrastructure projects. but we don't know much about what was agreed for the development bank. the other--but there is another side of the story. if these countries could not reach yet an agreement about the basic lines for lending or for forcing the development abroad the bank will be an opportunity to discuss these issues and try to reach a common grouped. so the bank from pie perspective at least, the bank is now a kind of a field or kind of common ground from which they will build a common understanding about development. >> will there be strings attached, and should there be strings attached when we talk about human rights and environment issues. is there a reason for it? >> that is a great question.

that is really one of the most exciting features of this new development bank. they claim they're not going to have conditionty. of course, everyone loves to beat up on imf world bank conditionty, blame them for problems in the third world. often conditionty is just a scapegoat, but there are lots of other strings that can be attached. a lot of research i've done shows that it may go to politically favored countries. countries strategically important to the united states or economically important to the united states. even if the brics doesn't condition their lending, it doesn't mean that there might not be some favoritism down the road, and they are going to have policy preferences. i should said when the imf was founded the word conditionty did not exist. it was something that developed over time.

the question is not today is there going to be conditionty, but down the road especially if the bank works at all, these are going to be chinese resources. china has political issues. maybe they'll condition it on your relationship with taiwan, for example. >> what if a country like iran looks for funding, looks for loans that runs counter to what western countries could allow, could that happen? >> sure. would any of the brics countries go again iran. >> what about greece, should there be economic strings attached. it has had trouble with loans because of the basic requirements. >> with the brics there will be too few strings attached to the greek loans. >> james, how does this allow

these countries, does it allow them to have a bigger voice when it comes to the world economic stage? >> well, i think at this stage its mainly symbolic, and it's bringing into focus the fact that these countries have arrived, the emerging markets have arrived. the united states has known for a long time that they need to move these countries up in their voice at international constitutions. but we have our domestic politics that are holding us back. these countries deserve more say, but it's hard to convince certain domestic forces within the united states that we should continue to fund international institutions if we're ceding more power away. the power is an international tightrope, and it's really going to be difficult for countries to

divide up the power in a just way and still satisfy domestic con sit wents. >> we'll have to leave it there. thank you so much to all of our guest this is evening. that bring us to the end of inside story. the program may be over but our conversation continues. we would like to hear what you think about the issues of today's or any day's shows. you can log on to our facebook page or send us your thoughts on twitter. you can reach me directly @lib casey. see you for the next "inside story." in washington, i'm libby casey. states focus is, and that's what the >> coming up at 6:00 p.m. eastern on al jazeera america

israel has greed to a humanitarian cease-fire in gaza. but even if it was scheduled for tomorrow it would only last for a couple of hours. an israeli military said it could launch a ground strike in gaza. all of this is happening after a strike in gaza killed four palestinian children. also there is a proposal to make california into six separate states. we'll hear from the man who managed to get the plan on the california ballot. that and more coming up at 6:00 p.m. meet troy, the dog who may have saved his master's life >> numbers ling up against me zzling up against me.