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October 25, 2014

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Monday, June 2, 2014

BRICS questions

By Andrés Federman
For The Herald

Last week brought dreams and nightmares for the government. The news on the Paris Club deal had a positive reception from all sides of the political and press divide, albeit for different reasons. Then came the news about the vice-president’s judicial woes. In a way, back to normal Argentina: dream for some and nightmare for others.

Shoehorned between both items, came Putin’s invitation to share the July 15 BRICS’ summit with the leaders of its member countries: Brazil, Russia, India, China and South Africa, in Fortaleza, Brazil. The message triggered Cristina Fernández de Kirchner’s tweeted enthusiasm as well as that of her chief-of-staff. The latter devoted a first (and long) section of his May 29 morning press conference to celebrate the invitation and offer a detailed inventory of the BRICS group’s strengths, even before mentioning Kicillof’s Paris Club deeds.

True, BRICS’ shares of world trade (15%) GDP (25%), and investment (20%) are significant. Add to that 43% of the world’s population and the figures become even more impressive.

But there is a sobering caveat as well as some questions worth asking. The caveat is that, being invited to an exclusive club’s annual dinner, is not necessarily an offer of membership. Some comments from government followers seem to ignore this, despite the Russian Foreign Minister’s own words. News agencies report that he told a press conference that “as far as the possible expansion of BRICS is concerned, this issue requires consensus in this organization. So far, no ideas have been voiced about planning further expansion.”

But, to paraphrase CFK’s tweet, these invitations are not about “tea and cakes” but about business. So this begs the question about what kind of business. On 29 May, Russia signed with Belarus and Kazakhstan a treaty creating the Eurasian Economic Union. Once it has been ratified, it will come into force on January 1, 2015. It is a market of 170 million people and 2.7 trillion dollars. And will guarantee free transit of goods, services, capital and workers. It is clearly business and non political. What role does Russia envisage for its BRICS partners — and possible new members — in this game? If one has to go by Héctor Timerman’s words, Argentine access will come through the Kazakhstan window, by partnering up with this country to help it become the food supplier of the new union. Does the fact that the announcement of the BRICS invitation and the discussions with Kazakhstan came almost at the same time a mere coincidence and consequence of the Foreign Minister’s itinerary?

Or perhaps, the real “business” reason for the invitation is that it is another step in Russia’s efforts to strengthen links with Argentina. There seems to be a generalized consensus that Russia wants to increase its presence in Latin America as part of its eternal (?) competition with the US. True, this is not the cold war any more. But it is not less true that there are some very serious political differences between both sides. The Ukrainian-Crimea issue is the latest but not the only one. In this context, the question of the commitments involved in a possible Argentine membership of BRICS begs asking. There are some issues on which, everybody would agree, it is better to have the US government’s support. The Supreme Court is one of them, and there are others. Words like capital markets, rating agencies and — God forbid — IMF and World Bank immediately come to mind.

So listen to this one: last Friday an (unidentified) senior Brazilian official told Reuters that the five BRICS nations will invest 100 billion US dollars in a new multilateral bank that could start lending in two years. This would be announced at the July 15 Summit. Given the Argentine government’s well known views about the IMF another quote from the same source will sound as music: “The bank will look into the finances of borrowers, but never intervene in their economic affairs.” And the fact that the same official added that “any country can join the bank with a US$100,000 share” in order to obtain loans at lower than market costs will obviously make the July 15 “tea and cakes” absolutely delicious. Especially because the BRICS countries have been trying unsuccessfully to put together this financial institution over the last two years. Perhaps it now comes to happen.

There is a final question which might sound quite petty. How do our Brazilian brothers feel about Putin inviting CFK? Obviously there is nothing wrong with that, and there is no reason to expect a turf war between Russia and Brazil about inviting Argentina or between the latter and Brazil about Cristina attending a BRICS meeting. In any case, it would be desirable that there are no waves between the two biggest members of Mercosur. Especially not at a time when bilateral trade issues are getting so complicated. The situation of the Argentine car industry is a good reminder of that. And speaking about reminders: perhaps the July 15 summit in Fortaleza reminds those in charge of the Mercosur summits that the last one is six months overdue. And there is no shortage of issues to discuss.

@andresfederman

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