New World Order? Emerging Giants Set to Meet for Fourth BRICS Summit

India’s Prime Minister Manmohan Singh, Russia’s President Dmitry Medvedev, China’s President Hu Jintao, Brazil’s President Dilma Rousseff and South Africa’s President Jacob Zuma (top L-R) attend a joint news conference during the BRICS summit in 2011. (Photo: Reuters)

Peter Schiff — who oversees around $1 billion in assets as head of Euro Pacific Capital in Connecticut — said: “I think you are going to see real growth in emerging markets as they are the fruits of their hard work and production. I think you have better prospects for growth and earnings than you do here in the U.S.” | Mar 28, 2012

By Oliver Tree

Leaders from the five emerging nations known collectively as BRICS have gathered for their annual meeting in India, which begins Thursday, amid growing tensions and competing interests among the rising economic giants.

The fourth meeting of the heads of Brazil, Russia, India, China and South Africa in New Delhi is set to focus on global food and energy security, international terrorism and establishing a global development bank that would rival  the Western-dominated International Monetary Fund and World Bank.

But while the event, a diplomatic forum akin to the Group of Eight and G-20 gatherings, is seen as another example of the growing economic and political confidence of so-called emerging markets, the BRICS continue to show little cohesion beyond their collective name.

“There is little sign of action from BRIC governments with regards to actually seeking collective economic stances on trade, investment, or other economic issues,” said Victoria Lai of the Economist Intelligence Unit.

Politically the group remains stuck in a two-tier hierarchy: Russia and China are permanent members of the United Nations Security Council, while Brazil, India and South Africa are not.

They are also divided when it comes to addressing multilateral issues.

“On most fronts, they present vastly divergent — and at times competing — strategic and economic interests,” Dr. Alexandra A. Arkhangelskaya, head of the Center for Information and International Relations at the Russian Academy of Sciences, told Al Jazeera. “Beyond Russia and China, the five countries rarely vote together at the UN.”

In political terms, the BRICS have also failed to convert their collective sway to the level of U.S. or European clout.

Current tensions in Iran, the escalating violence in Syria and a potential showdown over nuclear weapons with North Korea are issues on which the group could take the lead, and these will be discussed during the two-day summit in India.

But while the BRICS wield varying degrees of international influence and remain fierce economic rivals, they all share one common goal: the need to show the West they can make their own decisions.

Up For Discussion

Despite the political differences, the New Delhi summit is set to produce a number of key accords further marking the group as an alternative power bloc.

Two agreements on intra-BRICS trading are expected to be signed, in an effort to promote growth in a market already valued at $230 billion and growing at 28 percent annually.

Discussions will also include the formation of a BRICS development bank, modeled on the World Bank, that would prioritize emerging-market projects in infrastructure and other areas. That could reduce the members’ dependence on U.S. and Western European institutions for financing.

“The ability of BRICS to make intra-BRICS lending in their own currencies is a sign that they are breaking away from a dollar-denominated system,” said Cary Leahey, a U.S.-based economist with Decision Economics. “But it’s a glacial change; it’s not going to be a big change soon.”

Other commentators also regard the establishment of a development bank as a clear shot across the bow for Western global financial institutions.

“It is a way the emerging nations are trying to pull out of the Western-dominated World Bank and the IMF,” said John Mashaka, financial analyst at Wells Fargo Capital Markets, according to Al Jazeera. “Basically, India, China and perhaps Russia are trying to show off their economic clout; they are trying to demonstrate to the West that they can do without them. Above all they need freedom from Western financial influence.”

Bilateral deals may also be negotiated on the sidelines of the event, at which cooperation on renewable-energy projects will be discussed. Some observers expect news of a possible gas deal between Russia and China that could be worth up to $1 trillion and involve as much as 70 billion cubic feet of natural gas to be piped from Siberia to China each year.

At last year’s BRICS summit, in South Africa, seven stock exchanges in the bloc agreed to cross-list their traded securities, creating an intraregional market of more than 9,400 publicly traded companies worth a combined $9 trillion.

The initiative will be advanced this week with the launch of a benchmark equity derivatives index shared by the five major BRICS exchanges that can be bought in the local currencies of each investor nation.

Crouching Dragon

Hanging over delegates at the meeting however will be the issue of alleged Chinese currency manipulation.

At present, China is the U.S. government’s biggest lender, as it swaps dollar-denominated trade receipts (which pay no interest) for interest-paying U.S. Treasury securities. In March, China held roughly $1.11 trillion in Treasurys.

Critics have long maintained that China’s use of U.S. debt is a back-door strategy that artificially devalues its own currency, the yuan, giving it an unfair advantage in the export market.

While the U.S. and other Western nations often criticize what they call blatant currency manipulation, BRICS members such as Brazil are also unhappy with the practice.

Brazil’s powerful manufacturing lobby has voiced irritation about the undervalued yuan, and Brazilian delegates at this week’s summit are expected to raise the matter with their Chinese counterparts.

Lastly, the China Development Bank is expected to extend renminbi loans to the other BRIC countries, escalating its bid to oust the U.S. dollar as the reserve currency of choice.

Rising Stars

Despite their political differences, uneven economic clout and undefined association, the meeting is set to further highlight the group’s growing independence.

With the value of the BRICS economies expected to overtake that of the United States within three years, Peter Schiff — who oversees around $1 billion in assets as head of Euro Pacific Capital in Connecticut — said: “I think you are going to see real growth in emerging markets as they are the fruits of their hard work and production.”

“I think you have better prospects for growth and earnings than you do here in the U.S. We’ve got some serious, serious problems over here.”


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