Now that the FIFA World Cup is over in Brazil, it’s back to business in South America’s largest nation. And in the northeastern city of Fortaleza, leaders from Brazil, Russia, India, China and South Africa made more declarations about how they will become a winning team.
There was more talk about creating a development bank to fund projects in each others’ countries, and declarations on teaming up with mega sporting events. The Summer Olympics takes place in Rio in two short years.
Brazil, Russia, India and China have been meeting together for the past six years. South Africa is only a recent partner in what has become an emerging markets G-5 of sorts, with presidents hammering out growth ideas. Historically, the U.S. and former colonial powers in Europe have been the prime source of funding — and still are. But in the last seven years, for instance, China has replaced the U.S. as Brazil’s biggest market, thanks to soybeans and iron ore. And China continues to invest heavily in South Africa mining. Meanwhile, Russia has been touting its growing relationship with Chinese energy companies looking for natural resources and access to new technologies. On balance, however, the BRICS are still beholden to foreign investment from advanced economies, be it portfolio investors or multinationals based in the U.S. and E.U.
India’s new Prime Minister Narendra Modi is greeted by a representative of the Brazilian government in Fortaleza on Monday. Modi was attending his first BRICS Summit, where he met with the presidents of Brazil, Russia, China and South Africa.
The BRICS leaders said Tuesday that they were now exploring new areas of cooperation, including mutual recognition of university degrees; labor and employment and social safety net policies; foreign policy planning; trade insurance and building a seminar of e-commerce experts to move the five-some in the direction of the advanced economies, which dominate the high tech space.
For followers of the BRIC summits, it was more of the same, with this years theme being about sustainable and inclusive growth. This is a problem especially for Brazil, China, India and South Africa, and more so in China and India where income disparities are worsening.
In a declaration signed by the national presidents on Tuesday, deeper tights were center-stage. “We pledge to deepen our partnership with a renewed vision, based on openness, inclusiveness and mutually beneficial cooperation,” the signed document read. “We are ready to explore new areas towards a comprehensive cooperation and a closer economic partnership to facilitate market inter-linkages, financial integration, infrastructure connectivity as well as people-to-people contacts.
The BRICS continue to face significant financing constraints to address infrastructure gaps and sustainable development needs, particularly in India where poverty is most rampant. The leaders signed an agreement to officially launch the so-called New Development Bank (NDB), a World Bank for the BRICS, with the purpose of mobilizing resources for infrastructure and sustainable development projects in the four countries.
The NDB comes with authorized capital of $100 billion, with the bank’s headquarters in Asia’s new capital: Shanghai.
This year’s summit came with big money announcements.
The countries signed a treaty for the establishment of the BRICS Contingent Reserve Arrangement with an initial size of an additional $100 billion. This arrangement will be used to help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements, according to the declaration.
For investors who thought that China and Russia might open their economies to private enterprise, the declaration shows how the BRICS are firm believers in state owned enterprises. In Brazil, that includes oil giant Petrobras, the country’s biggest company by market cap. In Russia, that’s behemoth banks like Sberbank and gas firm Gazprom. For India, that’s basically ever bank on the mainland, not to mention the oil majors.
The presidents signed an agreement saying that they “encourage our state-owned companies to continue to explore ways of cooperation, exchange of information and best practices.”
Although each country has different problems, it was clear by reading the 72 paragraph declaration that each country had its input: from Russia being lauded for its role in hosting the G-20, to China reaffirming its interest in human rights.