The big emerging countries that are now the main pillars of world economic growth are looking to push their way into seats next to the rich nations’ club at the G20 summit in Washington on Saturday.
Brazil, Russia, India and China — the so-called BRIC countries — are determined to have their new heavyweight status recognised by the Group of Seven (G7) advanced countries, and win a say in directing the planet’s economic affairs.
Their newfound influence, particularly that of China, was felt last weekend when Beijing sent stock markets spinning upwards after announcing a $586-billion stimulus package.
Brazil and India, which have become the public lobbyists on behalf of the emerging markets, want a new financial architecture to emerge from the crisis, calling the current constitution of the G7, the International Monetary Fund (IMF) and the World Bank outdated.
Brazil has been especially vociferous in noting that, this time, the emerging countries were not to blame for generating the global crisis, which rippled out from the United States and quickly contaminated Europe.
The poorer countries, though, face big risks as the crisis grows and mutates, notably in terms of commodity export prices, lack of liquidity and foreign-exchange volatility.
Indian Prime Minister Manmohan Singh has said reform of the financial system is needed, and countries should acknowledge the “economically damaging role of excessive speculative activity”.
“When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done,” he said.
The demand by the BRICs was partially conceded by the main industrialised countries at a preparatory G20 meeting of finance ministers and central bankers in São Paulo at the weekend.
The group agreed that the IMF and other institutions formed from the 1944 Bretton Woods accord “must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy”.
The US representative at that meeting, David McCormick, Treasury undersecretary for international affairs, said Washington has long backed giving emerging countries more say in the IMF and the World Bank.
The summit, he said, “will be an opportunity for a very focused discussion among the world leaders on the global financial market crisis, and it will lay the groundwork toward making important regulatory changes”.
But so far no concrete moves for change have been made.
Singh is expected to push for greater IMF and World Bank assistance to vulnerable countries.
He and Brazilian President Luiz Inacio Lula da Silva are especially keen to see solutions that spare their nations from the fall-out of troubles emanating in rich countries.
To that end, they are looking for a better regulation of the rich economies — especially by imposing greater oversight over the transactions of multinationals — and for extra finance from both the IMF and World Bank.
Argentine President Cristina Kirchner is also expected to ask the IMF to compensate for the drying up of liquidity worldwide by giving credits to emerging nations without preconditions, an official said.
For Brazilian Economy Minister Guido Mantega, the task was a tricky one given that the crisis was still pummelling markets.
“We have to change the tyres while the car is still rolling,” he said. — AFP