Developing countries to the rescue at G-20
Jun 20, 2012, 4:27 PM
Associated Press
LOS CABOS, Mexico (AP) – The scene at the just-concluded Group of 20 summit held in this seaside resort would have been unthinkable a decade ago: Hundreds of dignitaries gathered in opulent Mexican hotels and convention halls to hammer out an economic bailout for Europe. Meanwhile, the leaders of Brazil and China kicked in tens of billions of dollars to the International Monetary Fund to rescue downtrodden Spain and Greece.
Although the gathering didn’t produce a solution for the ailing euro zone, it did outline the globe’s new balance of power. Developing countries projected optimism and wealth over the summit’s two days, while European and U.S. leaders struggled just to stay solvent.
A lot has clearly changed since the 1990s, when Asian and Latin American economies were slogging through recessions while Washington-based power brokers ordered up the very kind of austerity-minded prescriptions now sparking street protests in Europe.
Even during recent economic crises in the U.S. and Europe, China has been posting annual growth rates topping 8 percent. Countries with booming Chinese trade, such as Argentina and Ethiopia, have similarly seen their economies thrive. China’s economy surpassed Japan’s over the past year to become the world’s second biggest; Brazil’s overtook the U.K.’s to take sixth place.
“It is a different picture and reflects the fact that (developing) economies are not only the largest and fastest growing economies but are among the biggest economies in the world,” said Uri Dadush, director of the international economics program at the Carnegie Endowment for International Peace. “Clearly, neither the Americans nor the Europeans are in any position to tell the biggest economies what to do.”
Mexican President Felipe Calderon cut to the point while speaking to reporters Tuesday afternoon as he noted developing world contributions to the IMF for a possible European bailout. Although the countries still have lower standards of living, their economies are growing and many have amassed large foreign reserves.
China had pledged $43 billion to the fund, while India, Mexico, Brazil and Russia each chipped in $10 billion. The United States, Calderon drily noted, was not giving a single penny, due to “serious restrictions of a legal and political nature.” In other words, coughing up billions to save Europe was impossible for deadlocked U.S. politicians, especially in an election year and as the country struggled with its own budget deficits, economic analysts said.
University of Maryland economist Phillip Swagel, a former Treasury Department official in the George W. Bush administration, said developing countries’ new economic power was already translating into growing political might.
In fact, the BRICS countries representing Brazil, Russia, India, China and South Africa were the ones making demands on Europe during the summit, saying they should be given a bigger role in the governance of the IMF if they were going to send billions to the fund. Europeans have traditionally led the organization since its founding nearly seven decades ago.
“With their resources comes a greater say,” Swagel said. “It’s a big change. We were once telling Asian counties what to do.”
The power shift was clear in the air-conditioned hallways and balmy outdoor lounges of the G-20 where dignitaries and reporters mingled.
News crews from Ethiopia and China filled press conferences, while Brazilian and Russian leaders drew the most attention. Humbled European heads of state stepped before TV cameras to thank China for helping out while promising that their countries would do better.
Heloisa Castro, a Washington-based reporter for the Brazilian network Record TV, said Brazilians were energized by their new prominence, after so many decades of suffering dreadful busts and booms. Still, she said, they had no right to preach solutions to Europe, a point President Dilma Rousseff made to an international gaggle of reporters Tuesday.
Preventing European and U.S. turmoil from dragging down Brazil was the order of the day, Castro said, as economic growth in some developing countries has slowed sharply this year.
“I think it’s very curious that now, we who have been through all these IMF adjustment programs in the past with their draconian conditions, we now are seeing European countries go through the same thing,” Castro said. “But if the economies in Europe and the U.S. go down, we all suffer. We can’t only live with the BRICS countries.”
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