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Achievements of BRICS during the 2015 Ufa Summit

July 23, 2015

These are difficult times for the BRICS nations – Brazil, Russia, India, China and South Africa, well acknowledged in the underlying theme of this year’s BRICS summit at Ufa in Russia on 9th July —“BRICS Partnership – a Powerful Factor of Global Development.”

brics-achievements-in-the-light-of-recent-ufa-summit

The very first paragraph of the Ufa Declaration stressed on the discussions on “issues of common interest in respect of the international agenda as well as key priorities in respect of further strengthening and broadening our intra-BRICS cooperation”.

This is significant. The very foundation of BRICS was based on the perception that the BRICS countries were the emerging dynamos of growth and hence a promising destination for investors. However, things don’t look rosy at present and hence the stress on ‘partnership’.

Moody’s Investors Service reports that the old Gross Domestic Product (GDP) growth rate of 7 percent per year is shown only by China and India, while Brazil and Russia face stagnation and recession. The Economist predicts that International sanctions and lower oil prices may even contract the Russian economy by 3.5% in 2015 and the weaker Rouble and Russian counter-sanctions on western food imports could well push up inflation.  (It is significant that while the US and European Union have imposed an array of sanctions on Russian individuals and businesses in response to the annexation of Crimea and the crisis in eastern Ukraine, the Ufa declaration condemned “unilateral military interventions and economic sanctions in violation of international law and universally recognized norms of international relations… and that no State should strengthen its security at the expense of the security of others”).

Brazil’s Gross Domestic Product (GDP) has contracted 0.20 percent in the first quarter of 2015 over the previous quarter that had seen a 0.3 percent expansion in the GDP. China witnessed its slowest growth rate in six years at the start of 2015 and its Gross domestic product (GDP) grew an annual 7.0 percent in the first quarter, slowing from 7.3 percent in the fourth quarter of 2014. Its growth may further slump to 6.8 percent next year as per the projection of the UN World Economic Situation and Prospects ( WESP) report. South Africa’s Annual growth in GDP fell to 1.5% in 2014, but is expected to rebound to 2.0% in 2015 as per a report of African Economic Outlook. Only Indian economy is showing an upward curve and the WESP study predicts the GDP to grow by 7.6 per cent in 2015 and 7.7 per cent in 2016 overtaking China and is likely to “help accelerate economic growth in South Asia”.

Still, a Bloomberg study says that Russia – the present Chair of the BRICS grouping – is the “best bet” for investment among BRICS countries in 2015 though with a rider – “It’s an increasingly difficult call to get right because of politics…”

It may be mentioned that the concept of BRIC (South Africa joined the group in 2011) was floated by Jim O’Neill, an investment banker with Goldman Sachs in 2001, based on the huge potential of these emerging economies. He was right in his analysis as the following decade was a remarkable period of growth for the BRICS countries.(See more at: https://www.elections.in/blog/significance-and-achievements-of-brics-summit-2014/)

However, under the present scenario even O’Neill, in an interview with the US magazine Forbes in January, did not rule out that Russia and Brazil may leave the organization!

The reasons are not difficult to grasp. At the last BRICS summit at Fortaleza in Brazil, where the theme was ‘Inclusive Growth: Sustainable Solutions’ at a time when already economies of the BRICS nations had shown signs of weakness, there was a consensus among the member countries on the Contingency Reserve Fund to insulate emerging economies from currency volatility and help bail out the member country from a crisis situation. The members had then sorted out their differences at the very last minute to give a green signal to a New Development Bank to counter western hold on global finances.

However, at a time of economic slump, Russian media and analysts now point out at the reduced relevance of BRICS financial institutions particularly in face of competition of the Asian Infrastructure Investment Bank, initiated by China that performs “similar functions”. Russian media has of late also highlighted how the bilateral agreements between Russia and China outside the framework of BRICS testify the growing irrelevance of BRICS. A cited reference is to the official visit of Xi Jinping in Moscow on May 8, when both sides agreed on Russia’s future participation in the Chinese project Silk Road Economic Belt, while Russian banks received loans from China in Yuan!

Yet, BRICS does remain important to Russia. A report in Montreal based Centre for Research on Globalization (CRG) – an independent research and media organization, attributed the reason for BRICS’ relevance to “the growing realization among the member countries that they won’t be able to achieve financial stability as long as Washington dictates the rules, issues the de facto “international” currency, and controls the main levers of global financial power”.

Russian President Vladimir Putin too, acknowledged this view when he said in his Chairman’s address at Ufa as quoted by Reuters: “The BRICS states intend to actively use their own resources and internal resources for development… he New (Development) Bank will help finance joint, large-scale projects in transport and energy infrastructure, industrial development.”

Echoing Putin, the Chinese President Xi Jinping, stressed in his Key note address that the BRICS countries should “…advocate the construction of an open world economy…”

The Ufa Summit marked the arrival of of the New Development Bank (NDB) and the Contingent Reserves Arrangement (CRA) . The New Development Bank of BRICS was finally launched and began operating in the Chinese city of Shanghai on July 21. While the first head of the bank has been nominated by India (ICICI Bank’s former chairman, K.V. Kamath), China sees the new $100 billion international bank as “an addition to the existing international financial system.”

Indian Prime Minister Narendra Modi sought said,“We must acknowledge the success of BRICS in economic field” that included the “New Development Bank, Contingency Reserve Fund, Export Credit Insurance, Financing for Innovation and new proposals for Customs Cooperation and Reinsurance Pool”.

Little surprise, therefore, that the western media was disturbed that “none of the mainstream media organizations are covering the meetings”. An article in American magazine Counterpunch titled ‘Putin Leads BRICS Uprising’ commented that “the American people remain largely in the dark about a powerful coalition of nations that are putting in place an alternate system that will greatly reduce US influence in the world and end the current era of superpower rule”.

The Ufa declaration expectedly expressed its disappointment over the America’s “prolonged failure” to ratify the International Monetary Fund 2010 reform package, “which continues to undermine the credibility, legitimacy and effectiveness of the IMF” and  “prevents the increase in the institution’s quota resources and the revision of quotas and voting power in favour of developing countries and emerging markets as agreed by an overwhelming majority of members, including the United States in 2010”.

No doubt a strong and united BRICS is capable of assuming a much larger role due to a single fact that it brings together about 44 percent of the world’s population. The member nations realize this fact and Modi did point out at the BRICS Business Council that the member states contributed about 40% in global GDP and 18% in world trade, and that “the BRICS Economic Cooperation Strategy … will lead to a significant milestone in BRICS development.” Modi went on to stress the importance of strengthening the cooperation among BRICS economies at a time when global economy is “still not very strong enough” and that developed markets like Europe, are in the midst of crisis”.

Obviously, the way the member states rallied and adopted the Strategy for the BRICS Economic Partnership in Ufa would be the key guideline for expanding “trade and investment, manufacturing and minerals processing, energy, agricultural cooperation, science, technology and innovation, financial cooperation, connectivity and ICT cooperation” between the BRICS nations. In nutshell, the Ufa summit has succeeded in charting out a road map for BRICS, braving all odds!

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Disclaimer: The views expressed are of those of the author and do not represent the views of Elections.in.

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