Invesco Perpetual head of emerging markets Dean Newman expects emerging markets to begin to challenge the West and its dominance in the global economy.
Newman, who manages several emerging market funds such as the £349m Invesco Perpetual Latin America fund, expects institutions such as the IMF to become more efficient as a result.
He says: “Times are changing and new rising economic powers are questioning the current status quo.”
Newman refers to the fact that the leadership of the IMF is always a European national with a US citizen always being in charge of the world bank.
A few weeks ago the leaders of Brazil, Russia, India, China and South Africa – the Brics nations – met at a summit to agree on a new development bank and to create a currency contingent fund in the same mould as the IMF.
Newman says: “Given that the likes of Brazil and India have to finance huge infrastructure programmes, the Brics bank may provide an alternative source of funding in the future.
“The new $100bn currency fund could be a powerful tool in combating excessive market pressure on the Brazilian real or Indian rupee. If the BRICS do decide to use this new currency contingency fund, free of any US or European veto power, it may attract interest from other developing countries.”
A new BRICS development bank would arguably contain more equality and not be as Western-centric as the IMF or World Bank. While Newman does not predict a complete overhaul of Western dominance, he does foresee changes in how these institutions are run.
He adds: “We believe it is a small step on what is likely to be a long journey.
“Although they are unlikely to replace the well-established Western-based institutions we can reliably call upon now, greater competition may spur the likes of the IMF and the World Bank to become more efficient.”