BRIC solid

Jun 24, 2009 Editorial

Even before the present financial crisis had brought the developed world to its knees, there were prognostications that a new world economic order was in the making. At the beginning of the decade (and the millennium) Jim O’Neill, the chief economist of Goldman Sachs, the investment bank, had issued a report predicting that four “emerging” nations – Brazil, Russia, India and China – would surpass the current leading economies by the middle of this century. He dubbed them with the acronym “BRIC”.
Chief among his findings was that even then, the global economy could no longer be summarised simply with reference to the large, advanced economies. Nor could global policy issues, such as currencies, trade imbalances or climate change, continue to be addressed in conclaves of the Group of Eight.
The rise of the BRIC economies is demonstrated by the doubling of their share of world output: which was more than 15 per cent in 2008 compared with 7.5 per cent a decade earlier at market exchange rates. For developing countries such as ours, and the trading bloc to which we belong, Caricom, it is vital that we take cognisance of these changing realities so that we may position ourselves to take advantage of the evolving new possibilities.
Last week the four BRIC countries held their first summit in the Russian city of Yekaterinburg in an effort to better coordinate their policies.
They evidently had to do this in a rather ad hoc manner during their attendance of the two G-20 meetings in the past year, which confirmed their new position in the world. The strongest bond that seems to unite BRIC is their desire to play a bigger role on the world stage – which inevitably means that they envision a diminution of the position currently held by present world’s colossus – the USA.
Before and after the summit, Russia was most vociferous about mounting a new challenge to the U.S. dollar as the world’s reserve currency, but the final communiqué took a more cautious approach.
The latter position was dictated by the fear – especially by China – that a too confrontational approach would lead to a rapid depreciation of the US dollar and reduce the value of their hard currency reserves which are held in that currency.
While the four countries produce about 15 percent of the world’s gross domestic product (compared to the US 25%) they hold about 40 percent of the gold and hard currency reserves – some US$3 trillion.
Their 16-point statement said simply that the BRIC countries “believe there is a strong need for a stable, predictable and more diversified international monetary system.”
They also reiterated their earlier commitment to advance the reform of international financial institutions so as to reflect changes in the world economy. In a more or less direct attack on the Western domination of Bretton Woods institutions like the International Monetary Fund and the World Bank, the statement said emerging and developing economies must have greater voice and representation and the “heads and senior leadership” of these bodies “should be appointed through an open, transparent and merit-based selection process.”
Of interest to other developing economies, was their flagging of the need for a “comprehensive and balanced” outcome to the WTO’s Doha Development Round and food security, for which a separate declaration was issued. Stressing their long-held emphasis on a multilateral approach to global problems, the Joint Statement issued by Prime Minister of India Manmohan Singh, Russian President Dmitry Medvedev, Chinese President Hu Jintao and Brazilian President Lula Da Silva emphasised, “We look forward to a successful outcome of the UN Conference on the World Financial and Economic Crisis and its Impact on Development to be held in New York on June 24-26.”
Guyana and Caricom must include BRIC in their deliberations on how best to deal with the ongoing financial crisis. While not ignoring the past, we must look to the future.

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