The BRICs Bank: more than just another financial institution, but what does it mean for Brazil?
By Fred Bonatto.
In the coming month, the world is set to find out whether the BRICS will effectively launch a much awaited development bank, a move that would fill in a development-funding gap and bypass traditional Bretton Woods institutions. This new development seems to be giving the Global South even more autonomy and reflecting on the BRICS’ unwavering thirst for a louder voice in global politics. A discussion with noted Brazilian historian Amado Luis Cervo on what this means for Brazil reveals important deliberations that have been largely under-considered in traditional mainstream western media.
A new bank stirring the waters
On 13th July, when football fans witness the final game of this year’s anxiously awaited FIFA world cup in Brazil, cameras may find themselves trained on the host’s VIP box. Sat next to Brazilian president Dilma Roussef, spectators can expect to see China’s own Xi Jinping – a cozy rendezvous against a spectacle of chants and lights that is no coincidence. This year marks Brazil’s 40th anniversary of diplomatic ties with China, and Xi Jinping has been invited as Rousseff’s personal guest to watch the closing match.
Just two days after the final game, the two leaders will join the remaining members of the BRICS bloc in Fortaleza for their 6th annual summit. At the helm of this year’s meeting is the foundation of a new development bank poised to out-lend the World Bank beginning in 2016. Should this summit in fact succeed in launching the new multilateral bank, it will represent a marked change from the traditional IMF and World Bank Bretton Woods system that has been for decades “heavily criticized for meddling in the domestic policies of sovereign borrowers,” according to Gulf Times.
Introduced in 2001 by Goldman Sachs as a term to describe leading developing countries with great economic potential, the BRICS bloc has since self-consolidated and become the “reference for civil society in the Global South”. It has used its newfound voice in expressing staunch opposition to military interventionism in the cases of Syria and Lybia. The BRICS are no longer solely about gleaming investment opportunities - Brazil, Russia, India, China and South Africa have effectively solidified themselves as a political counterweight to the developed-north-led G7.
The rise of the BRICS and the creation of a new development bank suggest that a shift towards a multipolar world order is not something in the making, but rather a force in full swing that re-imagines what the developing world can be. This new institutional arrangement indicates that not one or two superpowers will be able to set the global agenda; rather, a “mix of leading countries” will participate in defining the next chapters of global geo-politics.
Brazil’s important global role
In order to understand the way Brazil has provided sustenance to the BRICS bloc, and how it has bolstered and co-sponsored the creation of an innovative transnational bank, it’s important to consider the shifts of Brazilian foreign policy that transpired in the period immediately before the coining of the original BRIC term, and what occurred during the decade that followed.
Historian Amado Luiz Cervo has been following developments of Brazil’s role in the international stage since the 1960s. His writings are widely studied throughout Latin-American universities. He is a professor at the University of Brasilia and the diplomatic graduate school, the Rio Branco Institute, where future Brazilian foreign policy-makers are trained. His thoughts on the creation of this new bank shed light on the complexities behind Brazil’s unique breed of foreign politics.
“Brazil has lost weight in the international system,” he said, “[the nation] is not talked about like it used to be” – a stark contrast from having the “potential to rank among the world’s largest and most influential economies in the 21st century”.
What initially fermented positive Brazilian outlooks was former president Luiz Inácio “Lula” Da Silva’s focus on “bolstering a logistical model of State conduct” where state and society worked in unison in order to achieve mutual goals. Arising from this successful internal dialogue, president Lula took center stage throughout his two four-year terms and launched Brazil into international politics in a manner his predecessors were never able to achieve.
In the 90’s Brazil had followed a ‘subservience’ model of international diplomacy, where it aligned its interests in an exclusively north-south orientation, heeding the United States interests. Later, beginning in 2003 and under Lula’s reigns, the country was able to achieve a dramatic turnaround. It tilted itself towards independence in the international stage. Lula implemented reciprocal diplomacy, strengthened Brazil’s ties with the Global South, furthered South-American integration (MERCOSUL) and drove strong economic growth whilst thinning socio-economic divisions and propelling national companies into international markets.
During Lula’s tenure, Brazilian based ImBev became the world’s largest brewery when it purchased the American Anheuser-Busch brewery, effectively owning one of the worlds most recognizable beer brands: Budweiser. During the same period, Embraer became the world’s third largest aircraft manufacturer, surpassing Canada’s well-established Bombardier. In the years following Lula’s inauguration, Brazil went from being a steady and conservative exporter, to a truly rising powerhouse.
“We will do it with our own resources.”
It would be naïve perhaps to discount the tremendous personal role former president Lula played in carving Brazil’s name in 21st century international politics. He defied the United states in 2009 when inviting Iran’s then-president Mahmoud Ahmadinejad for a state visit amidst Obama’s tour-de-force rallies to curtail Iran’s nuclear ambitions. Then there was the Honduran constitutional crisis in the same year, when ousted Honduran president Manuel Zelaya remained as a “guest” at the Brazilian embassy following Zelaya’s attempts to modify the nation’s constitution and the opposing military’s brief coup d'etat.
Nearing the end of his second term, president Lula concisely synthesized Brazil’s role in global discussions. Speaking to world leaders during the 2009 Copenhagen Climate Change Conference, he proclaimed, “We don’t need foreign money for our targets. We will do it with our own resources.” This sentiment lies at the heart of the creation of a new development bank, one that detaches itself from the historically powerful North American and European Bretton Woods system and paves new roads for the under-served Global South.
Details on the new banks’ actual workings are scarce, and have allowed for speculation regarding potential ‘pitfalls’. Firstly, according to Reuters, “too much proximity to any one of the five governments will create a credibility deficit,” and allow room for “political jostling” and regional favoritism. Secondly, according to Amado Cervo, the prospective inability to create a common-ground code of conduct for the institution that would assure “unimpeded governance focused on the interests of equality between the nations.”
The bank’s expected US $350 billion lending capacity may not seem like an extraordinary amount, but when considering that this represents roughly one and a half of what Brazil exports yearly, and a sizable fraction of the US $1.4 trillion-a-year infrastructure financing gap, it is no surprise that, according to Reuters, “the new institution's backers might be tempted to use it to further their own economic and foreign policy objectives.”
Brazil’s role in the new BRICS bank may also prove not to be solely restricted to a US $10 billion contribution. Its own experience with the highly successful BNDES (National Development Bank) in financing development projects both within national borders and beyond, including South-America, the Caribbean, and Africa, can provide valuable infrastructural and logistical capital-management expertise. In this respect, the new BRICS bank, says Amado Cervo, distinguishes itself from the World Bank in having “nuanced sensibilities when confronted with situations and development projects of the least financially, technologically, and cognitive-advanced nations.”
The challenges ahead
In today’s interdependent world, it can be unsavory to imagine a less ambitious and energetic Brazil. After all, according to former British ambassador to Brazil, Alan Charlton, the country has “fabulous natural resources, world-beating agriculture [and] hard-working and creative people.” In 2009, “it became clear [that] the solid foundations of its economy were enabling it to weather the [financial] storm”.
The collective ambitions of development, integration and industrialization are inevitably tempered by the “political unrest and structural challenges” so familiar to the Global South. So, it is no surprise that this year’s BRICS meeting is bound to be overshadowed as protesters gear up to pack the streets of Brazilian capitals chanting to tunes resonant with the ones underscored during the 2013 Confederations Cup.
Current Brazilian president Dilma Rouseff has not exerted continuity of Lula’s breed of presidential diplomacy, utilizing less of the previous administration’s foreign policy instruments, and remaining a leader that, “in brandishing a more personal and introspective mode of power” has “lost confidence and gravely compromised the operational efficiency of the Society-State machine,” Cervo reminds. This may lead to “disastrous results” for the internal development of Brazil and for its international projection.
Marcus Vinicius Freitas, international relations professor at FAAP University in São Paulo said to Time, “Rousseff doesn’t like foreign policy and Brazilian presidents historically don’t pay attention to it because it doesn’t bring votes.” Despite this, it has been suggested that Rousseff’s less pre-eminent foreign policy may bind it closer to the BRICS bloc, whose members, although sharing very little in terms of formal foreign policy directives, have stood together in global security matters in the past, and as we may soon see, herald a new era of development financing for the Global South.
A strong Brazil would need to, according to Amado Cervo, harness three important variables: the emergence of its own society, the dialogue between State and society, and the trust between both. But, Mr. Cervo laments, “they have had their systemic efficiencies compromised in the current [Rousseff] administration.” Furthermore, this means that the two former factors, already consolidated, rely heavily on the third, where the ‘style of governance’ represents an important and cyclical facet of Brazilian foreign policy. It remains to be seen whether a successful institutional arrangement of the new BRICS bank will allow room for greater Brazilian influence, and whether Rousseff’s tighter bloc foreign policy alignment will prove efficacious.
The BRICS bank and a new world order
The dynamics of the new BRICS bank, should it be in fact launched and despite its potential “opaqueness” and structural challenges, would likely do little in the way of disrupting existing North-North transnational power flows and leading blocs like the G7. What it does, however, is point towards a concrete shift in the direction of a multipolar world order.
During the Ukraine crisis, while the G7 and the European Union alluded to the cold war era when faced with a more autonomous and unpredictable Russia, the remaining BRIC nations did little to voice their opinion. It raises an important question of whether the once prominent driving forces of global influence have no choice but to adapt to a more influential and less subservient Global South.
As Roussef traces her own path through the ranks of Brazil’s leadership, and shakes the hands of the world leaders she chooses to associate with, the formation of a new BRICS bank will either shed light on the leader’s timid diplomatic talents, or ultimately allow for greater influence of the other BRIC members at the cost of a less relevant Brazil.
The United States has sent vice president Joe Biden as its special World Cup envoy, perhaps in the hopes of charming Rousseff back into a closer relationship with the waning super-power, after the NSA communications monitoring scandal saw a postponed state trip in late 2013. Whether this will play out positively remains to be seen, but Cervo suggests the partnership will continue to be more and more relevant. But as China surpasses the United States as Brazil’s main trading partner and places significant capital into the new joint development bank project, it’s difficult not to question whether Brazil is actively re-assessing its strategic ties and re-thinking its role within global politics.
The final FIFA world cup showdown is still some time away, and we still do not know who will grace the fields of Maracanã stadium in Rio de Janeiro, but as the world focuses on the rolling ball and who will raise the cup, two of the most preeminent BRICS nations leaders may very well be striking up a stronger alliance from the grand stands in anticipation of the 6th annual summit.
What Brazil’s Rousseff and China’s Xi Jinping discuss has the potential to enact significant influence in the developing world, a reality that has come a long way since the original BRIC term as idealized. The Global South continues to prove it is very much relevant in global politics, that it has a voice, and it may soon be ready to show the world that it too can foot its bill and change the course of history. When speaking of a multipolar world order, Amado Cervo holds no reservations – “it already exists.”
Fred Bonatto is a photojournalist and writer who has great passion for getting beneath the surface of his stories. More of his work can be seen by visiting fredbonatto.com.
