Building the foundations

Domestic success for the BRICS countries backs up their global posturing

Following on from a recent update post about where Brazil, Russia, India, China and South Africa are on the world stage at the moment, (see ‘A fortress made of BRICS‘– 08/06/11), it is worth taking a moment to look at the foundations of their international acclaim.

This week, the Brazilian Department of Work and Business released encouraging figures showing that the economy added 252,067 net payroll jobs in May. Despite some financial woes at the start of her presidency, Dilma Rousseff is clearly focused to try to continue the boom at home that her predecessor, Luiz Inacio Lula da Silva, kick-started.

India has become a hotbed for foreign firms basing themselves in the country or outsourcing many of their operations there. This expansion of the boundaries of domestic business, be it through Indian or overseas companies, allows India to move out itself. A report by US congressman Jim McDermott last year showed how Indian firms created nearly 60,000 jobs in the States between 2004-09 in deals worth $26.5 billion.

There is no doubt that a shift in the global circles of dominance is underway. Commentators in the US believe that, despite the lack of credible Republican candidates, Barack Obama may still lose next year’s election because of one main issue: domestic economic problems. The eurozone is also worryingly wobbly. Greece has to match China’s growth just to get itself out of what is fast becoming a deepening hole from which the only exit seems to be through a door marked ‘Drachma this way’. In contrast, as the Chinese deputy bank governor said in March, his country has the ‘market depth, liquidity and safety’ to see the Chinese yuan replace the US dollar as the major world reserve currency.

It is a cycle which allows an non-stop wheel of development for the BRICS countries. Their success at home breeds success abroad and the rising powers feel confident to challenge established countries on the world stage. By ensuring domestic growth, they can back up their international vision with internal achievements.

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Who’s your international money on?

Emerging markets have wasted their chance to come together to challenge Europe over IMF leadership

Even if Agustín Carstens is selected by the International Monetary Fund by the end of the month to become the organisation’s new chief, the celebrations would be muted. Developing countries would have been able to hold a louder party if they had rallied around a single candidate.

In the shortlist run-off the IMF is considering at the moment, Christine Lagarde holds all the aces. Amongst the cards in the French Finance Minister’s hand are the fact that she has a steady domestic economic record; she has been at the heart of the EU as it has tried to stabilise itself; and she is a woman. Mr Carstens has a reputation as a pragmatist and is currently the governor of Mexico’s central bank. He is also in a strong position as he is from a country that is outside the cosy club of economically powerful nations but still inside the wider G20 grouping.

This battle could be billed as a ‘First Division Lagarde v Second Division Carstens’ match. The leading First Division sides have all leant their support to the fellow top-flighter but, crucially, other teams in the lower leagues have not be able to decide whom to back. And even now that Mr Carstens has been selected for the play-off final he is short on patronage. He has had a lot of training and experience but this is a fight in which the judges concentrate on the strength and number of your seconds and supporters outside the ring, rather than simply the calibre of the pugilist in the ring.

Mr Carstens should be able to land a few punches on Madame Lagarde. She is representing the eurozone, an economic region plagued by budget deficits, cross-border bailouts and raging disagreements over defaulting and restructuring. But so far she has used her nous and charm and been able to dodge the weak attempted jabs. Mr Carstens would be in a much stronger position if developing nations had whole-heartedly plumped for him in the first place.

Dominique Strauss-Kahn, (a man from the cosy club), has been unceremoniously dumped from the throne of the world’s piggy-bank and this is a chance to engineer a shift away from what has been perceived as the natural order of things – having a European leading the IMF. This ought to be an opportunity to deliver a positive window to the emerging markets from which they could challenge other nepotistic hierarchies, (such as always having an American run the World Bank), but the lack of organisation points towards a defeat.

A fortress made of BRICS

The BRICS countries are building a formidable global power base but there are still cracks in the foundations

With the addition of South Africa to the group late last year, the emerging markets bloc has expanded its reach and capability considerably. It now has fingers in pies cooking in all corners of the globe and each member-state has a rough home ‘region’ where it is the dominate force. Brazil has majority sway over Latin American affairs, China rules the construction industry in Africa and Russia has diplomatic and industrial control throughout the former Soviet Union nations. But the way they influence and react with each other – let alone other countries – is both a cause for celebration and concern.

China is the most successful of the BRICS. It competes with Brazil in Latin America and rivals South Africa throughout Africa, be it through construction contracts in Angola or oil agreements in Sudan. Its conveyor lines drive European businesses back home and its markets are being opened up to foreign firms. It is powerful militarily, diplomatically and economically. China also is skilled at both comforting and irritating rival BRICS. It is happy to let South Africa be a diplomatic voice for Africa while it maintains its industrial strength there. But it has annoyed India by cosying up to Pakistan recently with economic agreements and plans for motorways and railways between the two countries. The transport links would pass through a part of Kashmir that India sees as its own and that Islamabad ceded to Beijing in 1963.

The other powers have also tried to carve out distinct paths across the globe. Brazil is promoting itself as a leader of a new international diplomacy by flexing its negotiation muscles and by engaging with Iran and the Middle East. Russia is still sending rockets to the International Space Station and is arguably the closest of the BRICS to Europe. India is starting to move its weight in South East Asia and has belatedly broken free from its comfortable domestic engine room to engage with African nations and make its nuclear-backed voice heard. South Africa is aiming to make the continent it foots its own, at first through diplomacy (President Jacob Zuma recently met Colonel Gaddafi for talks), and later by possibly challenging China industrially.

There are many sticking points. China and India have a disputed border and Beijing is cross that Delhi lets the Dalai Lama use India as his base-in-exile. Diplomatically, Brazil and South Africa are making an impact on the world stage, while quietly letting China continue to invest in their ‘home’ regions. But while China powers on, Russia is stalling and South Africa relatively inexperienced as the baby of the club.

It is up to Brazil and India to move the BRICS on from a second-class talking-shop to the most important international alliance. An Argentine writing his doctorate on Argentina and Brazil’s economies recently told me that “Brazil is big, very big – too big in fact” and the same could be said for India. They are outgrowing their respective Latin American and sub-continental origins and it is time that they give China a rest from pace-setting. They are certainly all building themselves up quickly and strongly and the West ignores them at its peril.

Where there’s muck there’s brass

Culture seems to be flourishing in Serbia whilst its politics still stumbles

The arrest last week of the former Bosnian Serb military commander Ratko Mladic was rightly welcomed by Europeans from across the continent. Overall, European foreign ministers have quietly agreed that Serbia has ticked one of the boxes required to join the EU. Other boxes do still need to be ticked though, including ‘capture Goran Hadzic’, another man wanted in the Netherlands on charges of war crimes. But generally the news was well received.

Serbia’s strides to present a cleaner and fairer face of itself on the international cultural stage have also been applauded. Its sports sides have enjoyed recent success: the national football side made last year’s World Cup Finals and the men’s tennis team won the 2010 Davis Cup. Tourists are starting to look past the beaches of Croatia to Serbia.

And Serbian gypsy bands such as the Boban and Marko Markovic Orchestra are at the heart of the ‘Balkan Brass’ music that is gaining popularity across Europe, with Romanian band Fanfare Ciocarlia a big rival to Markovic. ‘Balkan Brass’ calls on gypsy rhythms, Latin beats, acid jazz and big-band brass. It typifies co-ordination between different movements and feelings as bands regularly gather a dozen or more musicians on stage playing many different instruments at once. This harmony would be welcome in Serbia’s political world.

The arrest of Mr Mladic stirred large protests by right-wing Serb nationalists, a worrying sight for moderate and expansionist European politicians, and not exactly what president Boris Tadic would like to see, bearing in mind his desire to achieve full EU membership by 2018. But the rise of the right has been under way for a while now in Europe, with the success of the True Finns in the recent Finnish general election and the popularity of Marine Le Pen’s National Front in France the two main examples of this pan-continent electoral shift.

So how worried should EU expansion officials be by the reaction of Serb nationalists? The whole Balkan issue is of changing concern. Certainly, the Bin Laden-esque nature of Mladic’s capture (quiet village in remote countryside; politicians’ complicity and secrecy surrounding his location) is cause for concern. The open politics of Tadic seem friendly to outsiders but to other Balkaners, (for example Kosovars, whose independence Serbia, amongst others doesn’t recognise), it is nationalist and intimidating.

Ethnicity, language and religion have divided the Balkans for centuries but perhaps Serbia can now lead a Balkan turn to a new future post-Mladic and post-genocide. It must not be forgotten; but nor should Serbia’s history automatically preclude it from European modernisation. The government in Belgrade could do worse than calling to mind its rising cultural power and the harmony and respect inherent in ‘Balkan Brass’ to sort out political disputes. The music is gaining Serbia lots of friends on YouTube at the moment and it seems that now a few more are starting to shake hands with Belgrade on the diplomatic as well as on the musical stage.