Foolish ideological foray
EDITORIAL: The madness of a Brics ‘ratings club’
The decision by the Brics nations — Brazil, Russia, India, China and SA — to establish their own credit rating agency to "better cater" for developing economies is a foolish ideological foray. The move is premised on the mistaken belief that the three dominant agencies — Moody’s, S&P Global Ratings and Fitch Ratings — favour developed economies because they are part of the world’s Western-based financial architecture. This week, President Jacob Zuma said the Brics nations wanted to set up the ratings agency to "further strengthen the global governance architecture". The idea that the Brics nations need their own agency is as self-defeating as the ANC seeking to start its own newspaper. Here’s why: for investors (or readers, in the case of a newspaper) to have any confidence in ratings (or the content) the information has to be accurate. It has to chime with other information. To determine a country’s credit-worthiness, rating agencies look at a large number of indicators, including ...
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