And, as in the past summits, the one in Goa turned out to be a platform to express dissatisfaction with the shortcomings in the system of global governance, but it did not project itself as “a vehicle to overturn the system itself”. This point needs to be emphasised, for there is a wrong notion that Brics is meant to be an alternative to the global institutions such as the United Nations (UN) and the International Monetary Fund (IMF).
In fact, the Goa Declaration said, “We reaffirm our commitment to contribute to safeguarding a fair and equitable international order based on the purposes and principles of the Charter of the United Nations including through consistent and universal respect and adherence to the principles and rules of international law in their inter-relation and integrity, compliance by all states with their international legal obligations.”
They further added, “We reaffirm the need for a comprehensive reform of the UN, including its Security Council, with a view to making it more representative, effective and efficient, and to increase the representation of the developing countries so that it can adequately respond to global challenges. China and Russia reiterate the importance they attach to the status and role of Brazil, India and South Africa in international affairs and support their aspiration to play a greater role in the UN.”
On the economic challenges, the Brics leaders at Goa “welcome(ed) the adoption of landmark 2030 Agenda for Sustainable Development and its Sustainable Development Goals during the UN Summit on Sustainable Development on 25 September, 2015 and the Addis Ababa Action Agenda at the Third International Conference on Financing for Development.” They talked of “the G20 Action Plan on the 2030 Agenda for Sustainable Development adopted during G20 Hangzhou Summit and commit to its implementation by taking bold transformative steps through both collective and individual concrete actions.”
Importantly, they reiterated their “determination to use all policy tools – monetary, fiscal, and structural, individually and collectively, to achieve the goal of strong, sustainable, balanced and inclusive growth. Monetary policy will continue to support economic activity and ensure price stability, consistent with central bank’s mandates. Monetary policy alone, though, cannot lead to balanced and sustainable growth. We, in this regard, underscore the essential role of structural reforms. We emphasise that our fiscal policies are equally important to support our common growth objectives. We also take note that the spill-over effects of certain policy measures in some systemically important advanced economies can have adverse impact on growth prospects of emerging economies.”
Few can find faults with goalposts set by the Brics leaders in Goa. However, the real test lies in the cooperative endeavours at realising the goals by not treating them as rhetoric. And on this front, the report card of the Brics has not been very impressive. The Goa summit proved that China was not exactly in tune with India’s concerns over terrorism. Though the Goa Declaration did talk of the need for reforms in the United Nations, the fact remains that China has a completely different view from the rest four on the expansion of the UN Security Council.
On the economic front, while they all may agree on the better functioning of the World Bank, greater transparency of the IMF, non-discriminatory global trade and the developed countries “honouring” their ODA (Official Development Assistance) commitments to achieve 0.7% of Gross National Income commitment for the developing countries; the bitter truth is that the five Brics are not in a position to fulfill their own commitments for the structural reforms of their respective economies. Each one of them has its own peculiar domestic and regional challenges. China and Russia have essentially authoritarian systems of governance, whereas India, South Africa and Brazil are democracies where taking hard decisions are, more often than not, slow and politically risky.
This is particularly true of South Africa and Brazil. South Africa’s ruling African National Congress party has suffered its worst election result in the recent local elections since it came to power in 1994, threatening its rule in several of the country’s biggest cities. Its vote share has sunk to 55 percent, which is humiliating for President Jacob Zuma, who is surrounded by a number of scandals and been blamed by many for overseeing a corrupt administration. And this is no good news for the South African economy.
According to The The Economist magazine, with the weakening of President Zuma’s position, “economic growth will remain subdued in 2016, at 0.5%, held back by power shortages” and “growth will edge up to average 1.8% a year in 2017-20 as constraints ease gradually. The current-account deficit will be a source of concern, leaving the country reliant on foreign capital to plug the hole.”
Similarly, with the recent impeachment of the elected President Dilma Roussseff, Brazil is at a crossroad. Vice-President Temer has ascended to the Presidency at a time when Brazil continues under a period of turmoil. The country has been under recession, with Brazil’s economy contracting by 3.8 percent in 2015, and that figure could be matched in 2016. Inflation hit 10 percent by the end of 2015, and the fiscal deficit has also reached double digits. These economic challenges could have been addressed with decisive policy reforms, but the ongoing political crisis has led to a complete government gridlock.
Even Russia’s economy is not in the best of shape these days. Russia is also in some sort of recession as oil prices tailspin and Western sanctions following its takeover of Crimea really pinch. That leaves only China and India that are witnessing still respectable annual growth rates. But then, the fact remains that from around more than 10 percent annual rate of growth, China has come down now to less than 7 percent. India’s growth rate at 7.6 percent is the highest among all the Brics countries. But seen overall, the growth rate of Brics is really a disappointment compared to what it was estimated at originally.
It may be noted that in 2001, Goldman Sachs analyst Jim O’Neill had coined the term “Bric” (Brazil, Russia, India and China) to encapsulate what he predicted would be the four most dynamic emerging market economies of the new century. For him then, these countries (he saw their grouping to be a purely economic entity) would have extraordinary growth rates and there would be tremendous investment opportunities. Then the Bric liked the idea so much that they formed an official club (2009). Later they invited South Africa and became Brics (South Africa joined their ranks in 2011.) But the irony is that rating agencies like the Goldman Sachs are highly disappointed today with the Brics’ uneven economic performance in recent years (in fact, following the years of losses, Goldman Sachs closed its “Bric fund” in November 2015). So much so that the Brics has doubted their objectivity and is thinking of creating a ‘Brics credit rating agency’ (Modi is a big advocate of this idea), an idea on which the five heads of government could not reach a consensus in Goa.
Of course, to its credit, the Brics has created the New Development Bank (NDB), a $100 billion lending platform that will finance infrastructure projects in the Brics and other developing countries, and a $100 billion currency pool known as the Contingency Reserve Arrangement (CRA), which will aim to cushion the Brics economies from global financial pressures. The bank, which went operational last year, with leading Indian banker KV Kamath as its first head, has already done $900 million lending for renewable energy projects in Brics countries and is targeting at $2.5 billion lending for the coming calendar year. However, consensus eluded in Goa on establishing the connectivity between the NDB and the export-import banks of the member countries to facilitate trade among them. All told, the intra-Brics trade is not that healthy. For instance, in 2015, China had more trade with the United States alone than with its Brics partners combined. It earned $482 billion in exports to the US last year against a modest $244 billion to “the Brics family”.
This is not to suggest that Brics is nothing but “a fairytale”, a term that some Western critics use to describe the grouping. Brics might not have achieved much; but its very existence does signify that there is much to improve on the front of global governance.
In that sense, Daniel Chardell, a research associate in the International Institutions and Global Governance Programme at the Council on Foreign Relations, says, “The Brics may just be a symbol, but they are also a symptom of the world’s impatience with business as usual.”