Rising Powers Comment on 6th BRICS Summit

Policy Alert #78 | July 27, 2014

The BRICS (Brazil, Russia, India, China, and South Africa) held its sixth summit on July 15-16 in the Brazilian cities of Fortaleza and Brasilia, where agreements were signed for creating a Contingency Reserve Arrangement (CRA) worth $100 billion and establishing a $50-billion New Development Bank (NBD), to be headquartered in Shanghai. In this Policy Alert, we examine reactions to the outcomes of the BRICS summit from China, Russia, India, Brazil, and Japan. The RPI’s coverage of previous BRICS summits can be found here and here.

CHINA

Numerous commentators and media outlets in China hailed the BRICS summit as a milestone, praising the BRICS for positioning the group for a bigger role in both the political and economic spheres.

• Chinese President Xi Jinping expressed full confidence in the future of the BRICS over the course of the summit and in the days that followed. “(The BRICS nations) should both serve as an anchor for the stability of the world economy and a shield to ensure global peace,” Xi said.
• “If BRICS countries succeed in their ongoing economic structural adjustment and maintain momentum in growth, the group will play a bigger role in the global economy and have a more solid foundation from which to build political momentum on the global stage,” argued Wu Jiao, a writer for the China Daily.
• Another China Daily editorial wrote, “If the BRICS countries pool their thoughts and efforts in a common direction, they will spread their wings and fly further and faster.”
• Jin Canron, deputy dean of the School of International Studies, Renmin University, noted that the new BRICS bank “isn’t targeted at knocking down the West.”
• China’s Bank of Communications chief economist Lian Ping predicted that headquartering the NDB in China will “reinforce China’s central role” in the BRICS group, while the Global Timesquipped, “equality is the political foundation of this grouping and the development bank. That’s what differentiates the BRICS bank from the World Bank.”

RUSSIA

In Russia, commentators saw the BRICS summit as a means to end the existing U.S.-led world order.

• In an interview with Russian news agency Itar-Tass, Russian president Vladimir Putin stated that the BRICS countries want to “challenge the international financial system’s dependency on U.S. policies and strengthen the rule of international law.” He stressed, however, that there are no plans for a military or political alliance.
• In an interview with state-run RIA Novosti, Russian Deputy Security Council Secretary Evgeny Lukyanov predicted an end to U.S. hegemony. “New power centers have appeared on the international arena, including the BRICS nations, and Russia itself has managed to regain its stance,” he stated.
• An editorial in the Moscow Times justified Russia’s seat at the BRICS table and its role in the new BRICS development bank: “the country is the world’s biggest energy exporter…neither China nor India could sustain their current high pace of growth without either direct materials imports from Russia or, indirectly, from the global marketplace. That alone justifies a seat at the BRICS table.”
• Alexander Morozov, chief economist for Russia at HSBC Bank, said there is “no reason to think that the BRICS newbies must clash with their older cousins,” regarding the NDB. “The more good development banks, the better,” he concluded.

INDIA

Indian commentators and media responded positively to the NDB’s establishment and deemed Prime Minister Narendra Modi’s first major multilateral visit to a foreign country a success. The first rotational presidency of the NDB will likely go to India.

• Prime Minister Modi stated that the establishment of the NDB “opens up newer opportunities of cooperation with nations of South America.” Addressing concerns that the BRICS countries share little in common, he added that “distance is not a barrier to opportunities. It also does not insulate us from challenges in other parts of the world.”
• Financial journalist K.T. Jagannathan praised the NDB for its ‘one-nation one-vote‘ plan, which stands in stark contrast to the Bretton-Woods institutions- the World Bank and the International Monetary Fund- which “have structures that aren’t equitable, to say the least.” Former finance minister P Chidambaram also expressed enthusiasm for the NDB’s establishment. The Pioneer referred to the equally shared structure of the NDB as a “major victory for India.”
• Amitav Acharya, RPI author and professor of international relations at American University wrote in The Hindu that the NDB’s establishment serves as a reminder that “the era of Western and American dominance of the world is ending, giving way to a more complex and diversified world order: the multiplex world. The move by BRICS, though outwardly economic in nature, has serious geopolitical undertones.” An editorial in the Indian Express also shared this view.
• C. Raja Mohan, a fellow at the Observer Research Foundation, cautioned in the Indian Expressthat India’s partnership with Russia at the BRICS summit may be challenged by mounting international pressure on Russia by the West regarding the Ukrainian crisis. “India now confronts a new phase of international relations where the great powers are no longer at peace with each other.”

BRAZIL

The response in Brazil was generally positive, with the majority of coverage focusing on the foundation of the New Development Bank and the growing importance of the BRICS group.

• Dilma Rousseff said that the NDB won’t affect Brazil’s position relative to the IMF, but emphasized that the IMF no longer accurately reflects the world’s economic composition.
• Writing in Folha de São Paulo, the co-director of Columbia University’s BRICLab, Marcos Troyjo argued that the Fortaleza Summit and the formation of the New Development Bank would serve as a “trial by fire” for “BRICS 2.0”. He expressed skepticism about the NDB, declaring that, “in Fortaleza they did not lay the cornerstone of a new economic paradigm… despite its symbolic importance and potential. “
• O Globo qualified the establishment of the NDB as “creating new tools, inspired by the IMF and World Bank, but with more adequate resources for dealing with new challenges.”
• Estadão expressed optimism at the NDB and noted that the Summit was a success for Vladimir Putin in that none of the leaders criticized Russia’s involvement in the violence in Ukraine. Similarly, it lamented that two of the BRICS leaders are openly authoritarian while India’s new prime minister may have been responsible for a massacre in his home state, concluding, “one shouldn’t want everything.”

JAPAN

Commentary in Japan questioned the NBD’s reach, given its limited budget and the diverse interests of contributing countries.

• The Japan Times remained skeptical about what the NDB can accomplish, pointing out that “With $50 billion in capital, the NDB will be able to lend about $3.4 billion annually in a decade. The World Bank, in contrast, lends more than $60 billion each year. China provides more aid by itself…In truth, the NDB, like the BRICS concept itself, is more symbol than substance.”
• “Global governance just got a lot more interesting,” remarked another Japan Times editorial.
• The Yomiuri Shumbun questioned whether the NBD will be able to deal with financial crises, given the diverse nature of participating countries. It added, “It would be troublesome if the new development bank were to attach importance solely to expanding the natural resource interests or corporate profits of contributing countries, and to extend financial assistance without careful consideration.”