The World Cup and the Olympic Games aren't the only
globally-significant events
being hosted by Brazil. Last week the annual BRICS
Summit was held in Brasilia,
and the economic ramifications could well be felt for many
decadesto come.
BRICS Demonstrate New Power with Bretton Woods
Alternative (Le Figaro, France)
"The creation of a common reserve fund and a development bank,
based in Shanghai and managed by an Indian, is an open challenge to the Bretton
Woods system, which was created in July 1944 based on the twin pillars of the
IMF and World Bank. ... Dominated by the U.S. and Europe, the Bretton Woods
institutions havehad the advantage of
expressing a certain coherence. It is that very internal coherence that today
so inconveniently complicates their capacity to adapt to a new era. ... With
their investments, Beijing is going beyond the exploitation of natural resources,
while Moscow is declaring its geopolitical ambitions. A new competition between
economic blocks is in the process of being born."
Following
the Football World Cup, Brazil also hosted a summit of the five major emerging
countries: Brazil, Russia, India, China and South Africa (the BRICS). After the rout of [Brazil’s national team] "Seleçao,"
and alongsideVladimir Putin and Xi Jinping,
DilmaRousseff was able to
console herself by dreaming of a new world order and launching her election
campaign for October.
Despite the humiliation of the
national team, which was deprived of its star player Neymar
in their semifinal with Germany, the World Cup was a success for Brazil.
Notwithstanding protests the year before against the $11 billion swallowed up
by the construction of stadiums of fleeting utility, rioting predicted by the
most pessimistic never occurred. With preparations now underway for the 2016
Olympic Games, this alleged waste of public money may yet come back to haunt
the president. The collapse of a bridge in Belo Horizonte right in the midst of
Cup competition, only shed more light on the urgent need for infrastructure
financing, not to mention the sectors of education and public health, which
were neglected during the prosperous years in which China's remarkable growth
propelled the economy along.
Russia's Putin,
India's Modi, Brazil's Rouseff,
China's Xi, and South Africa's
Zuma: Can these countries with such divergent characteristics
and goals
mount a challenge to Bretton Woods, the
most successful system of global
financial
arrangements ever devised?
Like
Brazil, which is threatened by stagnation and rising inflation, the BRICS aren't in their best form. The Ukraine crisis
jeopardizes Russian growth, hopes raised by the triumphant election in India of
NarendraModi have yet to
materialize, while South Africa grapples with demands from miners and an
unstable currency. China alone maintains growth above 7 percent, but hasn't
dispelled fears of an even more pronounced downturn which could lead to a
bursting of its real estate bubble.
The time had
come for these major emerging countries, which represent by themselves 40
percent of the global population and a fifth of global GDP, to display their
new power. The creation of a common reserve fund and a development bank, based
in Shanghai and managed by an Indian, is an open challenge to the Bretton Woods
system, which was created in July 1944 based on the twin pillars of the
International Monetary Fund and the World Bank. Tired of waiting for U.S.
congressional approval for IMF reforms required to offer them representation
commensurate with their newfound global economic weight, the BRICS have created the embryo of a parallel system that
will present a counterweight, if not an alternative, to a system the
foundations of whichwere laid during
the Second World War, and at a time when the economic balance among nations was
very different than it is today.
The
future of these new bodies is very uncertain. The difficulties emerging
economies face spell the end of a period of accelerated catching-up, and
prolong Western domination. Yet it is the differences between the various
countries who met at Fortaleza that incite the most caution. The Russian oil
state has nothing in common with the immense Chinese market, where state
controls are the opposite of what prevails in the Indian or Brazilian
democracies. How can they coordinate their policies with such divergent
interests? That has always been the handicap for the BRICS, the patchwork
assembly of which has, up to now, been more symbolic than truly operational.
Dominated by the United States and Europe, the Bretton Woods institutions have,
since their creation, had the advantage of expressing a certain coherence. It
is that very internal coherence that today so inconveniently complicates their
capacity to adapt to a new era.
Posted By Worldmeets.US
Moreover, the dawn of an arrangement for economic
governance that merges the two giants India and China cannot leave one indifferent.
It points to the danger of a world divided in two, where emerging countries
feel excluded to the point that they disregard the evolution of international
institutions to focus on their own particular interests.
Before
and after the summit at Fortaleza, Vladimir Putin and Xi Jinping
separately toured Latin America to present themselves as alternatives to the
United States, and consolidate their presence in the region. China sought to
diversify its already intense economic relations, and Russia to emerge from the
isolation sanctions by the West over Ukraine threaten to impose. In both cases,
their strategies are becoming more refined. With their investments, Beijing is
going beyond the exploitation of natural resources, while Moscow is declaring
its geopolitical ambitions. A new competition between economic blocks is in the
process of being born.
