Prime Minister Narendra Modi along with Brics and Bimstec leaders pose for a group photo during the Brics Summits in Goa. Photo: PTI
The Brics summit held in Goa may not have produced any impactful announcements, but it helped reinforce cooperation initiatives between member-countries and their continued efforts to reform global governance. Brics stands for Brazil, Russia, India, China and South Africa. When formalized, the grouping’s initial purpose was to reform international financial institutions, particularly the International Monetary Fund (IMF) and the World Bank, which still reflect an outdated distribution of power of the post-war period. However, Brics has faced much scepticism, stemming from the perception that differences among member-countries far outweigh their similarities. Nevertheless, intra-Brics cooperation has expanded from just finance to cover a wide range of issues such as trade, education, science and technology, health and defence.
Brics countries have accounted for most of the global economic growth in the aftermath of the 2008 financial crisis which had its epicentre in the US. Since then, the grouping has been taken more seriously given the general sense that a significant shift of economic power was underway. The crisis also delegitimised the current global financial order, bolstering arguments for its reform.
Undoubtedly, the main achievement of Brics thus far has been the New Development Bank (NDB). It is the first among Brics institutions and demonstrates that the grouping can be proactive and implement its own proposals, rather than just criticising existing structures. Other high-income country groupings such as the G-7 have yet to produce anything of the sort.
Notably, the NDB, unlike the World Bank or the International Monetary Fund, affords equal voting and shareholding rights to all Brics countries. This is despite concerns that China may have a disproportionate influence in the Shanghai-headquartered bank. Also, the announcement made in Goa that the NDB will provide $2.5 billion by 2017 to finance clean energy projects clearly reflects Chinese influence and interests. China invests more in wind and photovoltaic technology than the rest of the world combined. It will allocate about $300 million to wind power investments in Brazil.
In Goa, Brazil also held significant bilateral meetings on the sidelines of the summit. Given the country’s current economic recession, scarce public resources available for investment and urgent needs of infrastructure upgrades, investments from Brics countries are crucial. Against the backdrop, Brazilian President Michel Temer underlined his commitment to improve the country’s business environment, and put Brazil back on a path of “political stability and economic recovery”. An investment facilitation deal with India was also signed.
Another institution that Brics is working on is a credit rating agency. Though consensus on this issue was not reached at the Goa summit, the matter should be pursued in future deliberations. This is important not only because of the distrust that Brics’ member states share about some of the current rating agencies but also to ensure greater norm compliance from Chinese firms and funds.
In the prevailing context of widespread protectionism, it is not surprising that the Goa summit discussions on intra-Brics investment and development finance took precedence over trade. Yet intra-Brics trade remains insignificant, except for the trade of each country with China. Brazilian foreign affairs minister José Serra claimed that Brazil’s trade with India has the potential to increase threefold, though studies suggest the two economies are moderately competitive rather than complementary.
The most important agreement signed in the Goa summit is expected to coordinate and speed up customs procedures and cut red tape in ports, thereby increasing trade between Brics countries. As has happened previously, Brazil, India, Russia and South Africa resisted China’s attempt to bring to the negotiating table a proposal for a Brics free trade agreement (FTA), fearful that it will lead to a surge in imports of Chinese goods.
That said, the Goa Declaration still underscored the overall importance of the multilateral trade system. This, of course, was the result in part of the mega-regional trade agreements such as the US-led Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership. Currently, the World Trade Organisation (WTO) is the only trade regime which includes all the Brics member-states, and despite the failures of the Doha Development Round, still plays an important role, not least in dispute settlement. Brazil has traditionally concentrated its foreign trade policy on the WTO, which is particularly important for the country, given the relatively few bilateral, regional and plurilateral FTAs in which it takes part.
The Goa Declaration also highlights intra-Brics cooperation for research and development of medicines, and India and Brazil have reached an agreement in this regard. India’s supply of 70% of the active ingredients of generic medicines worldwide and wish to project its traditional medicine abroad, as well as Brazil’s experience in treating AIDS with locally produced generics favoured such an agreement which includes cooperation in intellectual property rights.
In recent years, disparities in Brics’ economic performance have deepened imbalances within the group. While Brazil and Russia are expected to experience negative gross domestic product (GDP) growth rates, South Africa’s economic expansion will be modest, China will continue to hold its high GDP growth rates and India is projected to outperform all other Brics states this year. This affects the cohesion of Brics as well as its capacity to shape global economic governance. Yet, the continuous institutionalization of the grouping and the wide range of issues in which it advances cooperation evidence the promising future of Brics.
André de Mello e Souza is Coordinator of International Cooperation at the Institute for Applied Economic Research, Rio de Janeiro, Brazil.