From Yekaterinburg, Russia to Durban, South Africa: the evolution of the BRICS as an economic and political bloc

As earlier noted, although the term BRIC was first coined by Goldman Sachs in 2001, to signify the economic weight of Brazil, Russia, India and China in the world economy, the four countries did not constitute themselves as a political bloc until the inaugural summit meeting held in Yekaterinburg, Russia on June 16, 2009. South Africa only became a member of the grouping in 2011, having been invited by the founding members in December 2010. Subsequently, the group was renamed as BRICS—with the “S” standing for South Africa—to reflect the groups expanding membership.

The single most important topic that has occupied the attention of the leaders of the BRICS countries since the first BRICS summit in 2009 has been the urgent need to reform the current global economic governance architecture,

Table 10.3 Global position of BRICs companies in 2007 FT Global 500

Global Rank 2007

company

Country

Market value in Billions of USD

6

Gazprom

Russia

245.91

9

Industrial and Commercial Bank of China

China

224.79

23

Bank of China

China

165.51

35

China Construction Bank

China

128.53

41

China Life Insurance

China

116.28

52

Petrobras

Brazil

105.88

53

Sinopec

China

104.01

68

Rosneft

Russia

88.50

74

Vale do Rio Doce

Brazil

88.14

95

Lukoil

Russia

73.49

103

Sberbank of Russia

Russia

70.48

131

Unified Energy System

Russia

58.10

152

Surgutneftegas

Russia

51.33

166

Bank of Communications

China

47.07

182

Reliance Industries

India

43.87

187

Oil & Natural Gas

India

43.21

196

Ping An Insurance

China

41.67

205

Bradesco

Brazil

40.85

208

Banco Itau

Brazil

39.72

239

M M C Norisk Nickel

Russia

35.36

244

Ambev

Brazil

34.73

257

Bharti Airtel

India

33.29

265

China Merchant Bank

China

32.44

313

National Thermal Power

India

28.41

319

Tata Consultancy Services

India

27.72

331

Banco Brasil

Brazil

26.90

345

Infosys Technologies

India

25.83

469

Reliance Communications

India

19.76

475

Mobile Telesystems

Russia

19.61

487

Itausa

Russia

19.30

500

Wipro

India

18.69

Source: Financial Times Magazine 30June/l July 2007

Reforming the global governance system

demands for reforming die global financial architecture. As the G-20 scrambled to replenish IMF resources in order to enable the institution to fight the crisis, the BRICS were the only countries that could contribute substantial amounts towards the IMF crisis response fund.

In June 2012, the BRICS pledged $75 billion for boosting the IMF’s $430 billion crisis reserve fund, which would substantially enhance its capacity to support the Euro zone. India, Russia and Brazil all contributed $10 billion each, South Africa contributed S2 billion, and China a massive $43 billion. But this was conditional on IMF quota and governance reform. Subsequently, in 2010, the IMF Executive Board, in its “2010 Governance and Quota Reform" endorsed a decision to provide greater representation and quotas to emerging powers in keeping with their larger presence in the global economy. This decision was seen as a historic step towards strengthening the Fund’s legitimacy and effectiveness. The IMF Board also endorsed proposals that called for a more representative, all-elected Executive Board. Unfortunately, the decision was blocked by the US congress and the stalemate is likely to continue even with the election of Donald Trump as America’s president in 2016.

The proposed reform would have shifted more than 6 percent of quota shares to emerging market and developing countries while protecting the quota share and voting power of the poorest members. The 6 percent quota re-allocation would have come from the over-represented countries, resulting in a major rebalancing of voting power. As a result of these changes, China’s voting share was expected to increase from 2.98 percent in 2008 to 6.07 percent, while India’s share would have increased from 1.91 percent to 2.63 percent by 2013. Importantly, the share of the US would have declined to 16.49 percent from 17.6 percent, thus preventing the US from using its veto power to stop any major decisions in the IMF (IMF, 2010).

These reform proposals were expected to be in place by 2012. Unfortunately, the United States Congress has effectively blocked any move towards the reform of the governance structure of the IMF. This American intransigence is unlikely to be broken anytime soon. It is clear that the developed countries are unwilling to dismantle a global governance system that has served them well since World War II. Only when we see a breakthrough in Security Council membership and radical shifts in the voting power at the IMF and the World Bank can we truly say that middle-powers have exerted their influence on global governance.

 
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