Is BRICS Challenging the West?

The fourth BRICS summit representing Brazil, Russia, India, China and South Africa was held on March 28-29, 2012 in New Delhi. Despite the limited timeline, its results might be defined as outstanding. In any case it’s obvious that the leaders of the member countries had no intention to confine themselves to purely symbolic resolutions, so the outcomes of the event look very impressive.

The signing of the Master Agreement on Extending Credit Facility in Local Currency and the Multilateral Letter of Credit Confirmation Facility Agreement by the heads of development banks of the member states are the main achievements. Meanwhile the parties declared their intention to initiate a reciprocal payments scheme in national currencies that would allow exclude Dollar and Euro from internal trade transactions among BRICS members. India even proposed an idea to create a new development bank for BRICS countries drafted as “South-South Bank”. The Finance Ministers of the states agreed to tackle the issue without delay.

Moreover the BRICS members were confident in the clamant need for IMF structural reform, first of all aimed to get the Fund off de facto US control. According to the BRICS, the IMF management structure should match the existing geopolitical reality, take into account the apparent redistribution of resources and growing influence of developing countries, as well as prospects for strengthening this trend. The BRICS nations stand for an increase in the IMF reserves, meaning their own financial contributions in the first place. China put a special emphasis on enhancing representation of emerging nations. It’s easy to see the emphasis is directly intertwined with the China’s intent to include the yuan in the currency basket of the International Monetary Fund.

The BRICS also called on the West to evade cosmetic reforms “to cure” the financial crisis by simply giving priority to emission of money and other actions of the same character that lead to excess of liquidity in the world financial system. No doubt that the BRICS decisions are related to the most fundamental issues of contemporary world. It’s the monopoly of the single global currency and the carefully preserved status-quo of a unique superpower abusing the absence of competition. Do the BRICS decisions pose a challenge to existing world order? No doubt they do. Even one of them – the coordinated desire to enhance its representation and influence in the IMF – can evoke serious concern among those who have used the Fund to their own advantage until now.

Definitely the BRICS have been gradually ousting the leading financial actors from their previous positions. Their total quota has already increased in the World Bank from 43,97% to 47,19%, and in the IMF from 39,5% to 42,29%. The moment when the virtual control stock – and political clout as well – will shift into the hands of the BRICS is most likely not so distant. All the prerequisites for major transformation are already in force. The member countries suffered less than others during the economic crisis, they enjoy sustainable economic growth that seems pretty robust in comparison to Europe and the USA, although lower than in the previous years.

The final resolution calls for intensification of international financial funds management reform. Those who have sufficient resources should be given more rights to facilitate the world economy restoration. Even under the most pessimistic forecast the BRICS will become a world economic leader by 2050. Besides the major part of the world’s natural and human resources is concentrated on the territory of the member countries.

Leaders of Brazil, Russia, India, China and South Africa at the official photo session on BRICS Summit, New-Delhi, March 29, 2012

The BRICS clout within the G20 is also about to grow. The next stage after the use of national currencies for mutual trade and credit, will be engaging this “platform” for the purpose of macro-regional economic and financial stability. It can hardly be viewed as an over-hedging – two of the BRICS members, China and India, come under this kind of threat for buying energy resources from outcast Iran. The very fact that the BRICS members decided to coordinate their actions while preparing for the coming G20 summit in June may be perceived as another disturbing signal for ‘the golden billion’.

To endorse the South African initiative the BRICS announced its decision to promote African large scale infrastructure projects for sustainable development of the continent, including health and food security. The member countries expressed their support for the proposal that the heads of IMF and World Bank be selected through an open and merit-based process.” The BRICS emphasized the need to “strengthen global economic governance” and influence the WTO decision-making process on trade disputes. The joint statement on Syria showed unanimous support for the UN envoy Kofi Annan’ mission and his efforts to reach a peaceful settlement of the conflict.

The New Delhi summit agenda included literally all burning issues on the contemporary world. The decisions taken and common views expressed are in stark contrast with ones considered indisputable until now. Naturally it would cause a nervous reaction from those who used to feel comfortable with the current state of affairs. To withstand the inevitable diplomatic and media pressure BRICS leaders should follow the recommendation of Chinese President Hu Jintao – to strengthen and deepen mutual political trust.

The article was originally published in Russian at WIN.RU

Translated by ORIENTAL REVIEW

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