From left to right: Xi Jinping (China), Vladimir Putin (Russia), Jair Bolsonaro (Brazil), Narendra Modi (India), and Cyril Ramaphosa (South Africa). Photo: PR

This week, the heads of state of Brazil, Russia, India, China, and South Africa are gathered in Brasília for the annual BRICS summit, with meetings scheduled for Wednesday and Thursday before the publication of a joint declaration at the end of the week.

While this week’s event has flown largely under the global radar, the BRICS were once heralded as the future of the world’s economy. But the five member nations have grown unequally, with China becoming a global superpower and the remaining quartet sputtering along modestly.

This Forbes story from 2017 shows how dependant Russia, Brazil, India, and South Africa have become on China. In general terms, the Chinese buy Brazilian and South African commodities—which has become even more critical for Brazil in the wake of the economic downturn—while exports to India have grown exponentially. For Russia, China is also a strategic ally amid quarrels with the U.S. and European Union

An egalitarian bank?

It is surprising that such a move happened within a bloc that tried to change power imbalances between developed and non-developed countries. Its most notable initiative towards this goal was the New Development Bank (NDB), a pioneering project founded in 2015 that aimed to diminish the infrastructure gap in emerging markets—a deficit estimated at between USD 1 to 1.5 trillion per year, according to the Brazilian Institute of Applied Economic Research (Ipea). 

The bank also has a huge concern towards supporting green initiatives and, in the future, creating credit opportunities for emerging markets by offering loans with cheaper rates and long repayment deadlines. 

It began as an egalitarian initiative, with each founding member owning 20 percent of its shares and promising to invest 20 percent of the USD 10 billion in paid-in capital until 2022. The bank also has a subscribed capital of USD 50 billion, an amount that is set to increase gradually until reaching USD 100 billion. Also, no member has veto powers; all nations share the same status and appoint the chair in a rotating presidency model.  

Observers quote the high AA+ credit score it achieved in only four years as a major success, as well as the nimble and startup-like structure that allowed it to lend USD 12.5 billion for 43 projects in this short space of time. It also diversified, creating bond programs in local currency in China, South Africa, and India. 

However, as of October, not every country was enjoying the benefits equally. China and India attracted 33 and 30 percent of the loans, respectively. Brazil was at the bottom, with only 9 percent. As Ipea’s researcher Luciana Acioly writes in the report “BRICS’ financial architecture: The New Development Bank,” the bank has been used by China as part of its international agenda, just like other development funds and banks. 

“The point of NDB is how to diminish possible conflicts and harmonize interest between the bank’s role and China’s actions on the course of its international insertion. The country’s approximation towards other developing countries to offer funding does not always reflect NDB’s vision,” Ms. Acioly wrote, adding that it is important to analyze whether the current system of command is enough to avoid a single country gaining supremacy, as was the case with the U.S. and the World Bank.

Brazil’s current low funding volume may be explained by the terrible fiscal situation the country is in, with the majority of state and municipal governments not having a high enough credit score to request the federal government’s support when borrowing money abroad. But as Brazil heads toward fiscal balance, things may change. Also, in 2020, the country will have a big role in the NDB, appointing its next chair and receiving a new regional head office in Brazil—a project that is still pending Congress approval.    

Brazil and China: beyond the BRICS

Over the past ten years, China has become Brazil’s main trade partner, accounting for almost 28 percent of all Brazilian exports between January and October this year. Currently, Brazil enjoys a trade surplus of USD 21.5 billion with the Asian giant, mainly propelled by commodities such as soy, crude oil, and iron ore.   

The relations among companies from both countries have also strengthened in the past few years. Época Negócios Magazine says Chinese firms invested USD 55 billion in Brazil between 2007 and 2017. During the 2018 election campaign, there was fear that this booming trade would cool after the election of Jair Bolsonaro, who claimed China was not “buying from Brazil, but buying Brazil itself,” as well as his declared preference to be close to the U.S. in terms of foreign policy.  

However, as the tensions have cooled, Sino-Brazilian bilateral relations have stabilized, with vice-president Hamilton Mourão reopening the Cosban, the High-Level Sino-Brazilian Coordination Committee, which had been stalled since 2015, due to Brazil’s lack of a vice president. President Bolsonaro has also visited China already this year, and the BRICS summit is expected to underline these friendly relations.  

“During the private conversations, the nations expect to deal with the challenges of innovation-based economic growth, and also interest in Brazilian foreign trade,” says Francisco Americo Cassano, an international commerce professor at Mackenzie Presbyterian University. 

Undoubtedly, business will be a strong part of the summit. According to Brazil’s Foreign Ministry, each international delegation will bring its own business crew of up to 500 names, set to take part in the closing ceremony of the BRICS Business Forum.

Regional diplomacy

However, what was meant to be a lowkey summit has taken on an added spice with recent developments around South America. On November 10, Bolivian President Evo Morales was ousted from office, forced to resign “on request” of the country’s armed forces. While Brazil maintains there was nothing untoward about events in Bolivia, the rest of the BRICS nations—mainly Russia and Vladimir Putin—have denounced the existence of a military coup d’état.

Venezuela is another hot-button issue. Disagreements were already bound to appear at this week’s meeting, with Mr. Putin and Xi Jinping being Venezuelan President Nicolás Maduro’s largest remaining global anchors, as opposed to the Brazilian government’s unwavering support for self-proclaimed interim president, Juan Guaidó. But events early on Wednesday morning are set to fan flames further.

A group of pro-Guaidó supporters broke into the Venezuelan embassy in Brasília, just a few blocks away from where the BRICS summit is held, reportedly assisted by embassy employees who have rebelled against Mr. Maduro. An estimated 30 people attempted to breach the gates of the diplomatic headquarters on Wednesday morning and police were forced to use pepper spray to attempt to dispel the disturbance.

Venezuela’s Foreign Minister Jorge Arreaza condemned the invasion, saying it breaches the Vienna Convention on the Law of Treaties, while the Brazilian government has shown its support.

However, while these matters are bound to be discussed during bilateral meetings on Wednesday and Thursday, they will not make it onto the BRICS joint declaration at the end of the summit. Meanwhile, there is one diplomatic question which could be involved in the declaration, and which could be another source of dispute between the member nations. 

In last year’s joint document, BRICS nations underlined their support for the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNWRA), which goes against Brazil’s new policy of automatic alignment with the U.S. on diplomatic matters. The Foreign Affairs Ministry, led by antiglobalist crusader Ernesto Araújo, is working hard to get this point removed from this year’s declaration.

What’s the point?

Ten years since the inaugural BRIC meeting in the Russian city of Yekaterinburg—before South Africa was made a member—the group is facing an existential crossroads. Does it still make sense to have such an alliance, considering the huge chasm which has opened up between China and the other four members? For Brazil’s current government, such alliances with China and Russia seem to be counter-intuitive to its diplomatic goals, but strategic relations with important global economies must be welcomed—particularly when Brazil seeks to capture more and more foreign investment.

The power dynamic between BRICS nations has changed. But, while hardly the most important alliance for any of the five member countries, it is certainly better than nothing.[/restricted]

BY Euan Marshall

Euan Marshall is a Scottish journalist living in São Paulo. He is co-author of A to Zico: An Alphabet of Brazilian Football.

BY Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, worked as an Editor for Trading News, the information division from TradersClub investor community.

BY Lucas Berti

Lucas Berti covers international affairs—specializing Latin American politics and markets. He has been published by Opera Mundi, Revista VIP, and The Intercept Brasil, among others.