Economy tops agenda as BRIC summit kicks off in Brazil
Initially the summit was supposed to go on for two days, but on Thursday Chinese President Hu Jintao made a request to cut the meeting because of a devastating earthquake in one of Chinese provinces, which has killed more than 600 hundred people.
He plans to leave Brazil early to go home. All the participants have already offered China help in dealing with the aftermath of the quake.
As the BRIC countries are petitioning for emerging economies to have a greater voice in global financial institutions and for a more diversified monetary system, the presidents are expected to focus on how to promote regional currencies and to lessen dependence on the dollar.
The four countries, which together make up a quarter of the world’s land area and 40% of the global population, are also some of the biggest holders of US treasuries. Investors worldwide will be closely watching how the four major emerging economies will manage their reserves, which is a total of $3 trillion.
India is one example of a country that has bounced back. A year ago, at the height of the global economic slowdown, profits for the country dropped as clients in the West cut spending. Now, however, industry heavyweights believe the worst is behind.
“We are looking at a growth rate of 13 to 15%. That's nearly treble. If that doesn't bring a smile back I'm not sure what will. Don't get me wrong, we cannot be complacent, the economic environment remains terribly uncertain – double dip recession, who knows what happens? But at the end of the day, companies have diversified, they have become meaner and leaner,” says Pramod Bhasin, president of Genpact, the largest Business Process Outsourcing company in India.
With the BRIC countries successfully overcoming the global financial crisis, Russia wants its quartet with Brazil, India and China to take coordinated action to protect economic stability. India says the group should play a bigger role in international financial institutions and within the G20.
“You need it – the broader consultation. The G8 simply did not reflect enough of the world's GDP – and certainly not enough of the growth in the world's GDP – to be the key forum. But when you go from 8 to 20, you have to work a bit harder to create a sense of collegiality,” says Montek Singh Ahluwalia, from the planning commission of India’s government.
The leaders of the BRIC countries are eager to reduce their dependence on the dollar in international trade.
“These four nations… They are distinguished not just by being the biggest, they face the world, whose international institutions and arrangements were basically created by the older Western powers. In that sense, they have a common interest”, says Jan Randolph, head of the Sovereign Risk Group, IHS Global Insight.
However, there are certain problems the countries have to deal with to become key world players, such as a surge in food prices in India which is stoking inflation worries. Poor infrastructure is also seen as a hurdle to India competing globally.
India, with its large domestic market, low costs, and world-class innovation, is definitely a market few can ignore, and so Western companies are pouring money into the country.
“Everything you can do to decrease the cost of delivery, the cost of your services is good for your clients and good for you. That's the first reason to be in India, but there is another which is even more important. We are facing a shortage of talent in Europe, and to have access to this infinite pool of talents in India is a real competitive advantage”, says Francois Enaud, the Chairman of Steria, a European company providing IT enabled business services in India.
BRIC countries’ leaders will continue to co-ordinate their positions on reforming international financial institutions, believes Paulo Sotero, Director of the Brazil Institute at the Woodrow Wilson Center.
“All those [BRIC] countries have survived very well the latest [economic] collapse and they want a more stable world,” he said, adding that they are dissatisfied with their voting share in those international institutions because it “does not reflect the current reality.”
A political analyst from the Asia Times, Pepe Escobar, told RT that the BRIC summit could be a milestone in the rise of a new multipolar world.
“Brazilian diplomats and businessmen know that this summit is absolutely crucial. Let’s put it this way – this will be the first polls-to-Washington consensus summit because the BRIC is nowadays – Brazil, Russia, India and China – they are the de facto counter power to the unilateral power of the United States,” Escobar said. “And obviously people in Washington, a lot of people inside the Obama administration and a lot of commentators, are very worried, because this means in practice a very, very strong political, economic and commercial cooperation between the four big countries in the developing world, which are going to be the four next great powers in the 21st century.”
Yaroslav Lissovolik, chief economist at Deutsche Bank, believes that the BRIC countries are there at the summit to set new trends in the global economy.
“I think that you already see in the discussions among these countries that one of the items on the agenda there is, at least in the initial stages, to bolster the rolls of their own currency, and mutual trade, and mutual investments, and then that can be a precursor to a gradual de-dollarization of the world economy and to a greater role of these currencies in world trade,” he told RT.