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Sources say that BRICS will launch a guarantee fund to boost investments in member nations.

Two people with knowledge of the matter said that the BRICS group is about to announce a new fund to reduce financing costs and increase investment.

Sources who spoke on condition of anonymity said that the initiative is modeled after the Multilateral Investment Guarantee Agency, or MIGA, which was established by the World Bank to help address global investment shifts in the face of uncertainty regarding U.S. policy.

Brazilian officials consider the fund to be the focal point of the BRICS' financial agenda for the duration of Brazil's rotating presidency. Sources claim that the fund will be included in the joint declaration at the BRICS Summit in Rio de Janeiro, next week.

Initially formed by Brazil and Russia, India, and China, BRICS later added South Africa, and expanded recently to include other developing countries to increase their influence in global governance.

One source said that the proposed BRICS Multilateral Guarantee Mechanism (BMG), incubated by the NDB, had received technical approvals from the member states. It now awaits the final signoff of BRICS Finance Ministers. This is considered a formality.

The Brazilian Finance Ministry has declined to comment.

At this stage, the initiative does not require any additional capital from members. It aims instead to channel existing NDB funds to projects in developing countries.

Officials involved in the negotiations have not disclosed the initial funding value, but they expect that each dollar of guarantees provided by NDB will mobilize between $5 and $10 in private capital to fund pre-approved project.

This is a political guarantee instrument. One source stated that it sends a signal to the world that BRICS are alive and working on solutions.

The technical preparations for the establishment of the fund should be completed by the end this year. This will pave the way for the pilot projects to get guaranteed funding in 2026.

The BRICS nations face the same challenges as other developing countries in attracting private investment on a large scale in infrastructure, adaptation to climate change and sustainable development.

Officials claim that the NDB's credit rating, which is higher than most of its member countries, can help to mitigate perceived risk for commercial banks and institutional investors. (Reporting and editing by Manuela Andreoni and Bernardo Caram)

(source: Reuters)