All across the world in July 2014, billions of football lovers had their attention glued to Brazil, and the FIFA World Cup. And as the victorious Germans took their hard-earned cup of joy home, the fever subsided and viewer attention receded from Brazil. But in the week after sans fans and fanfare, Brazil saw history being made – at the podia of the BRICS summit. Read on.
In Fortaleza, it happens not quite so often that one major global event segues into another. In recent weeks the city in northern Brazil was a venue for the FIFA World Cup. Barely had most of the football lovers left for their homes, that the city saw the arrival of some top-level politicos from across the continents. Of the new world, that is. The heads of state of Brazil, Russia, India, China and South Africa (BRICS) converged on Brazil to hold a summit meeting at this Brazilian port-city.
What is a BRICS? BRICS is the acronym that stands for five of the major emerging national economies on the planet, viz., Brazil, Russia, India, China, & South Africa. The grouping initially went by the handle of “BRIC,” before inclusion of South Africa in 2010. Though BRICS members are all developing or newly industrialised countries, all are characterised by large, fast-growing economies, and significant influence on regional and global affairs. All five, apropos, are G-20 members. The BRICS, representing three continents, accounts for more than a quarter of the world’s land area and 40% cent of its population. They have a combined GDP of US$ 24 Trillion, about 20% of global GDP. The BRICS had held series of annual summits since 2009, and the theme of the just ended sixth summit was: “Inclusive Growth; Sustainable Development.” Even if not nearly as many people were excited by the meeting as were by the World Cup, the BRICS summit of Fortaleza will go down in history. The emerging economic powers have made it clearer than ever that they want to cooperate, and that they are no longer prepared to accept the rules laid down by western institutions. The most important action emanating from the meeting was that the participants have succeeded in resolving all their sticking points, and have launched the longplanned US$ 100 Billion BRICS Development Bank as counterpart to the World Bank, and also instituted an emergency reserve fund known as Contingent Reserve Arrangement (CRA). The new bank will be based in Shanghai, and its first president is to be Indian, after which the chairmanship will rotate every five years. Each of the five founding states has agreed to contribute ten billion dollars as the initial seed capital. This investment will subsequently increase in value to 100 Billion dollars. The money is to be used for financing projects in the BRICS countries, as well as in other developing countries and regions. An additional 100 billion dollars will be pooled in to form a new BRICS monetary fund (the CRA), to which China will contribute 41 Billion dollars. Brazil, Russia and India will each put in 18 billion dollars, while South Africa will add another 5 Billion dollars to the kitty. This new BRICS fund ever so uncannily resembles another institution from the “Old World”, the IMF.
Seen from an accidental or non-Western frame of mind, the source of the BRICS partners’ institution-building enthusiasm seems quite obvious. For the attitude of the World Bank and the IMF have characteristically been one of ‘heads I win tails you lose’, having long failed their ‘partners’ from emerging markets, placing them on unequal terms. They’ve often been stingy on credit, and even if this be granted, so many strings were attached to it that bespoke conditions that corresponded to the values of the US and the West, having nothing at all in common with the aspirations of emerging economies. Yes, this yearning for newer trade organisations has its origins in the ire over Western unreasonableness. For them, there was indeed no scope of reforming the old world institutions, or usher in any modicum of fairer play in their dealings with emerging nations. So, taking the line of least resistance, they have simply created their own networks that will leave the West out in the cold. And mark my words, the BRICS Bank and the BRICS Monetary Fund are just the beginning of a trend that will soon translate into a torrent … we are already seeing how a plethora of new free-trade agreements are popping up across continents, and how an economic summit comparable to the World Economic Forum in Davos was established last year. And given the way the emerging markets are being pushed around by the WTO time and again, it is merely a question of time before an alternative to the World Trade Organisation appears on the scene. Underlying tensions, however, persist and the BRICS initiatives are surely not portents for a new world economic order. Not yet. Especially when their exist undercurrents beneath the seemingly placid waters of the BRICS partner economies. Three of the partner economies are still under stress, though Brazil might well be an exception, what with the steroidal stimulation its economy has been dosed with in connection with the recently concluded FIFA World Cup and the upcoming Rio 2016 Olympics. But past experience tends to suggest that Brazil too is likely to experience recessionary trends and a pinch of economic depression post the games. While Russia, whose heavy economic dependence on natural resources is an Achilles’ heel indeed, and may therefore be said to be in a weaker position, not to mention It’s troubles arising out of the messy conflict in Ukraine; Africa’s big-boy RSA is also still in the clutches of a long drawn out period of slow growth, and is grappling with a bout of economic weakness over the past few years. India’s problems are akin to those of Brazil — poor infrastructure, stagflation, slow industrial growth, and the country is just now grappling with the task of putting It’s economy back on the rails, after a decade plus of a policy paralysis putting paid to reforms both political and economic that have been on the back-burner for too long. Prime Minister Narendra Modi is currently on probation, as he will first have to prove to the world that he can get a grasp on these issues and raise India’s banderol once again. Seen from this context, China does come out top-of-the-class.