Category Archives: New Development Bank (BRICS)

G20 or G5? BRICS leaders reunite in Brisbane

Group Twenty, known as the G20, is a summit held among the world’s economically developing elite. The forum is made up of the following 19 countries + the European Union: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, and the United States. Depending of the location of the summit per year, the residing president can invite guest countries if wanted.

“The G20 heads of government came into being in 2008 because economic catastrophe loomed, and the existing global governance organizations and institutions were unequal to the tasks at hand,” according to CIGI and its report on the future of the G20.

This year the 2014 G20 summit took place in Brisbane, Australia. As stated by the CIGI report, the G20 was started after the 2008 Financial Crisis. The forum has promoted economic stability and has helped to realign the economy in the right direction, by the means of collaboration and communication between world leaders.

“One of the key items on the G20 agenda is new transparency and beneficial ownership requirements that are aimed at fighting money laundering and the financing of terrorism. The requirements also support the OECD’s and G20’s efforts to prevent other serious offences such as tax crimes and corruption,” says The Sydney Morning Herald.

The G20 aims for sustainable growth and development, and since 2008 it has introduced $3 trillion of financial stimulus into its central bank system between the pact countries. G20 also (attempts to) tackle other issues that cause geopolitical friction, this year in Brisbane conflicts such as: the rising tensions between Russia and Ukraine and the looming threat in the Middle East will also be focused on.

“Well, Washington and its string of puppets did try to turn the G20 into a farce. Fortunately the adults in the room had some business to do,” reported Russia Today, satirically addressing the majority of the G20 as a “tiny bunch of Anglo-Saxon political buffoons [attempting] to drown out the Global South.”

In the Russia Today report, the work of the adults, or rather the “G5” BRICS nations, were reunite and discuss matters of real importance. As coined in 2001 by Goldman Sachs, “Building Better Global Economic BRICS,” the countries with rapidly emerging economies: Brazil, Russia, India, China and South Africa make up the BRICS power-pact. Matters such as the BRICS New Development Bank investments and a restructuring of the decrepit IMF were at the top of the list according to Brazilian President Dilma Rousseff.

In 2010, the IMF’s Board of Governors approved a reform that was key to increasing voting power of emerging markets, for example those of Latin America and BRICS nations for a more equal economic trading field, something that is worse for Republicans in Washington than even communism itself, says Russia Today. Putin confirmed that trade between Russia and China and the rest of Asia is planned to increase from 25 percent to 40 percent of Russia’s GDP (2096.78 billion USD).

Russia-China trade investment, which has increased in Latin America, is increasingly in rubles and yuan depreciating the U.S. dollar. For BRICS nations this trade is welcomed with fellow partner countries and companies. Brazil, under the reelection of President Dilma Rousseff, a leftist leaning president, is one of the main countries in Latin America shifting away from U.S. influence.

(L-R) Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, Chinese President Xi Jinping and South African President Jacob Zuma join their hands at a group photo session during the 6th BRICS summit in Fortaleza July 15, 2014.(Reuters / Nacho Doce )
(L-R) Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, Chinese President Xi Jinping and South African President Jacob Zuma join their hands at a group photo session during the 6th BRICS summit in Fortaleza July 15, 2014.(Reuters / Nacho Doce)

From Cultivation to Privatization?

It is without a doubt that Latin America is full of resources. Originally when the conquistadors, Hernan Cortes in Mexico and Francisco Pizarro in Peru, arrived in the 1500’s the mineral rich land was immediately exploited. However, the mineral jack pot is not the only resource that Latin America has had exploitation problems with; the regions make-up consists of vast ecological resources, flourishing marine life, agricultural hubs, and the petrodollar.

El Dorado

The Amazon region alone, located in north central South America, accounts for at least 10% of the world’s known biodiversity. The region itself extends across 6.7 million km, which is about twice the size of India, according to the World Wide Fund for Nature (WFF).

Just within the western part of Brasil, there are 3,500 different varieties of plants. 250 different fish species and 650 different types of birds, writes Arturo A. Fox, author of Latinoamerica: Presente y Pasado.

Brasil’s agricultural center also provides the United States with about 50% of its cattle/beef imports, 26% of Russia’s imports, and 9% of Hong Kong’s, reported Brazil Business.  Argentina ranks behind Brasil and Australia in beef exportation.

As stated, Pizarro and Cortes originally built their empires of off the land’s mineral deposits. According to reports from 2004 by USGS (United States Geological Survey),  Latin America, “is a major producer of mineral commodities like copper (53 percent of world production in 2004), silver (48 percent), zinc (30 percent), nickel (32 percent), molybdenum (43 percent), iron ore (29 percent), gold (21 percent), lead (18 percent), primary aluminum (17 percent), salt (19 percent), and manganese (12 percent).”

Peruvian Miners at the Cabeza de Negro gold-and-copper mine in Yauca del Rosario, Peru.
Peruvian Miners at the Cabeza de Negro gold-and-copper mine in Yauca del Rosario, Peru.

Chile as well produces about half of the world’s consumption of iodine, according to Fox.

Lately, however, the petrodollar has spoken the most over other resources, especially in Venezuela. A whopping 90% of Venezuela’s exports alone are its crude oil.  Venezuela, being a member of OPEC (Organization of the Petroleum Exporting Countries), accounts for the highest percentage of crude oil reserves out of all of the OPEC countries, an estimated 24.7 percent as reported in 2013.

OPEC itself accounts for 81% of the world’s crude oil reserves, about 1,206 billion barrels.

Venezuela is not the only oil extraction country, companies like Mexico’s Pemex, Peruvian PetroPeru, Argentinian Bridas Corporation, Brasil’s Petrobras, Chile’s Empresa Nacional Del Petroleo, Colombian Ecopetral, and Urugauy’s ANCAP, are examples of progressively growing oil and exploration and productions companies within the region.

 

The Global Market benefits everyone, right?

Since the inception of these countries, there has been a big problem among government instability, resource management, and a growing globalized economy that eventually ensnared most of these countries into a dependent trend where they become reliant on their fixed export economies. Latin America is an example of a region cultivated and harvested for its resources, however not making sufficient income from the global market to actually stimulate growth from its exports within its countries.

The instability and weakness of the governments causes officials to give in to foreign investment, usually not fighting against the exploitation of their resources, let alone protecting the rights of their citizens. Shady back deals for personal gain between foreign companies and corrupt regional figure heads is normally how most of the work was and still is done in many parts of the region.

Due to market dependence, a term in 1995 was coined after the Mexican Economic Crisis, which inevitably affected international markets around the world. The term is, “el efecto tequila,” or rather “the tequila effect.”

The tequila effect, which became prevalent after the 1995 crisis, showed some of the dangers of such an intertwined global market. If one market went down, especially an economic powerhouse or supplier, like Mexico was to the United States, all the other economies would as well.

 

Efecto Tequila
Efecto Tequila

A Switch to Populism

After the 2008 Financial Crisis, those countries that didn’t get the picture the first couple times, realized the pain of a recession caused by the tequila effect.

Brasil under President Luiz Inacio Lula da Silva, was one of the first to come out of the 2008 Financial Crisis and slowly began a movement of privatization and populism.

Populist, or neo-populist experiences, have differed with neo-liberalism on the issue of state intervention and social inequality while also promoting non-pluralist forms of political engagement,” according to writers Fabian Bosoer and Federico Finchelstein of Queries, a European progressive magazine.

Other leftist leaders like, Michelle Bachelet of Chile, Cristina Fernandez de Kircher of Argentina, Evo Morales of Bolivia, Tabare Vazquez of Uruguay and Alejandro Lugo of Paraguay, also began to implement a more populist privatization type system. The switch of various countries to a more leftist system in Latin America has still remained under a democratic scheme as of the 2000’s, but most leaders can permit the perpetuation of their own power under corrupt systems.

These new movements have even lead to rebellions against neoliberal reforms and against multinational corporations dedicated to the exploitation of natural resources, especially resources like petroleum and natural gas. Bosoer and Finchelstein also note,

 In Latin America, populist movements have tended to combine authoritarian plebiscitary presidential leadership, elected by popular majorities, and a curtailment of political rights parallel to the expansion of social rights…As a whole, Latin Americans lived through the first grand crisis of neo-liberalism some ten to fifteen years ago and the result was that the region left neo-liberalism behind.”

Although some countries like Chile, with a new carbon tax, are making progress with privatization, most have rather began to create their own new partnerships, as has been seen in past articles with increased trade and aid between Russia and China and Latin America.

Argentina is an example of a country that is trying to turn away from U.S. debts and start anew.

Ironically under these new populist systems, recently Brasil and Argentina have both been in different stages of an economic recession.

Behind the Scenes Agreements

"Leaders of the BRICS nations, from left: Russia's President Vladimir Putin, India's Prime Minister Narendra Modi, Brazil's President Dilma Rousseff, China's President Xi Jinping and South Africa's President Jacob Zuma"
“Leaders of the BRICS nations, from left: Russia’s President Vladimir Putin, India’s Prime Minister Narendra Modi, Brasil’s President Dilma Rousseff, China’s President Xi Jinping and South Africa’s President Jacob Zuma”

This summer, in Fortaleza, Brasil, the members of the new BRIC agreement established a New Development Bank. BRICS, standing for: Brasil, Russia, India, China, and South Africa, is starting off with a $50 billion basis, each signatory contributing $10 billion.

According to the Washington Post, “The capital base is to be used to finance infrastructure and ‘sustainable development’ projects in the BRICS countries initially, but other low- and middle-income countries will be able [to] buy in and apply for funding.”

The BRICS countries have also created a Contingency Reserve Arrangement (CRA) of $100 billion, which will provide extra economic protection to members when payment problems arise.

“The CRA—unlike the pool of contributed capital to the BRICS bank, which is equally shared—is being funded 41 percent by China, 18 percent from Brazil, India, and Russia, and 5 percent from South Africa,” noted by Raj M. Desai and James Raymond Vreeland of the Washington Post.

With organizations like the World Bank and International Monetary fund, why was the New Development Bank created, and furthermore, why between these specific countries?