The Rise of BRICS

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BRIC seeks global voice at first summit

Sun Jun 14, 2009 7:13pm EDT

MOSCOW (Reuters) - The leaders of the world's biggest emerging markets -- Brazil, Russia, India and China -- meet in the coming week for their first formal summit, seeking a louder voice on the global stage.

Leaders of the so-called BRIC nations will discuss ways to reshape the global financial system after the worst economic crisis for decades and ideas for a new reserve currency to reduce dependency on the U.S. dollar may be on the agenda.

"The good news is that rich countries are in crisis and that emerging countries are making a huge contribution to save the economy and, consequently, save the rich countries," Brazilian President Luiz Inacio Lula da Silva told Reuters on Wednesday.

"Wealthy countries are no longer the only ones that account for the world's production capacity and consumption," he added, saying the BRICs should work together to "change the political and trade geography of the world.

The BRIC term was coined by Goldman Sachs economist Jim O'Neill in 2001 to describe the growing power of emerging market economies. The June 16 summit in the Russian Urals city of Yekaterinburg marks a step toward cooperation as a group.

BRIC countries account for 15 percent of the $60.7 trillion global economy but Goldman Sachs predicts that in 20 years time, the four countries could together dwarf the G7 and China's economy will overtake the United States in total size.

"BRIC is a myth but a myth that is slowly becoming a reality," said Alexei Pushkov, a professor of international relations and a leading Russian journalist.

"This summit shows there is a tentative community taking root. The question is whether it can become a political institution or whether it will be dormant."

Behind the bluster, divisions abound.

Chinese President Hu Jintao brings as much GDP to the table in Yekaterinburg as the three other BRIC countries combined and Beijing is wary of being seen to confront the United States.

It is Russia and Brazil -- arguably the weakest BRIC members -- that have been most vocal about pushing for discussions on reducing dollar dependence.

China, the world's largest holder of U.S. Treasuries, says the dollar will retain its dominant role and analysts said there is unlikely to be substantial agreement on major issues at the summit.

"This meeting shows the growing influence and voice of the emerging world, something that the Obama administration is also paying attention to," said Qin Yaqing, vice president of China Foreign Affairs University in Beijing.

"But there are also big differences between them. So complete cooperation between them would be extremely difficult, but partial cooperation is possible, and a meeting like this will help amplify their shared voice," said Qin.

Russian President Dmitry Medvedev has made proposals on giving a greater role to the International Monetary Fund's Special Drawing Rights that echo ideas from Chinese central bank chief Zhou Xiaochuan.

Russia said it would reduce the share of U.S. Treasuries in its $400 billion reserves and buy IMF bonds. China, Russia and Brazil have pledged to help capitalize the IMF as they seek more influence at the fund.

(Additional reporting by Chris Buckley in Beijing and Raymond Colitt in Brasilia; editing by Janet McBride)

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Russia, China, others urge diverse monetary system

THE ASSOCIATED PRESS

Brazilian President Luiz Inacio Lula da Silva, Russian President Dmitry Medvedev,Chinese President Hu Jintao and Indian Prime Minister Manmohan Singh, from left, seen at the first full-fledged summit of Brazil, Russia, India and China, collectively called BRIC, in the Ural Mountains city of Yekaterinburg, Russia, Tuesday, June 16, 2009. Officials from Russia, China and Brazil have said in recent weeks that they would invest in bonds issued by the International Monetary Fund to diversify their dollar-heavy currency reserves. While BRIC members share a desire to play a bigger role in creating a new global financial order and counterbalancing the West and Japan, their often contradictory interests would make forging a common policy a difficult task.(AP Photo/Mikhail Metzel)

YEKATERINBURG, Russia -- Brazil, Russia, India and China on Tuesday called for a more diversified international monetary system, but wrapped up their first full-fledged summit by avoiding any explicit criticism of the world's dominant currency, the U.S. dollar.

The statement issued by the leaders from the so-called BRIC nations contained no reference to developing new reserve currencies to complement the dollar, which Russia had called for at a separate event earlier in the day.

Instead, the cautious wording appeared to reflect China's concerns that any anti-dollar statements could erode the value of its currency reserves.

"There is a strong need for a stable, predictable and more diversified international monetary system," the final statement said.

A reformed financial and economic architecture should be based on "democratic and transparent decision-making and implementation process at the international financial organizations," it said.

The BRIC nations urged the international community to keep the multilateral trading system stable, curb trade protectionism and they stressed a commitment to "advance the reform of international financial institutions to reflect changes in the world economy."

The group repeated long-standing calls that emerging economies like Brazil, Russia, India and China be given greater representation at major institutions like the International Monetary Fund or the World Bank.

The document called for broader cooperation in the energy sphere, diversifying energy resources and energy transit routes.

It also underlined support for a "more democratic and just multipolar world order based on the rule of international law, equality, mutual respect, cooperation, coordinated action and collective decision making of all states."

The wording reflected a longtime call by China and Russia, shared by other developing nations, for a bigger say in global affairs to counter what they see as the U.S. domination in global affairs.

The absence of any criticism of the U.S. dollar appeared to be a compromise by Russia. President Dmitry Medvedev said earlier Tuesday that the creation of new reserve currencies in addition to the dollar was needed to stabilize global finances.

Brazil will host the next summit of the BRIC meeting in 2010.

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From The Times

June 15, 2009
World Agenda: Looking to the future without the West


The Russian President Dmitry Medvedev, right, shakes hands with his
Chinese counterpart Hu Jintao before a closed meeting of SCO leaders
in Yekaterinburg

Tony Halpin in Yekaterinburg

In the place where Europe slides into Asia, the world without the West is gathering to flex its political and economic muscles.

The Bric nations — Brazil, Russia, India and China — and the members of the Shanghai Co-operation Organisation (SCO) are attending simultaneous summits for the first time. The meetings, in the Russian city of Yekaterinburg, give a glimpse of the globe tilting east and south in coming decades, away from the traditional dominance of the United States and Europe.

For advocates of the inevitable triumph of liberal democracy, this is a depressing prospect. Brazil and India are thriving democracies but the prime characteristic of most of the governments gathered here in the Urals is authoritarian, often of the ugliest variety. Apart from China and Russia, the SCO comprises the former Soviet states of Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan. President Ahmadinejad of Iran, busy crushing protest over his “landslide” re-election, has observer status, along with India, Pakistan and Mongolia. President Karzai of Afghanistan will also be present.

Almost half the world’s population is represented by the two organisations and a growing proportion of global GDP. This is the first summit of heads of state of the Bric countries, whose increasing economic clout has merely been dented by the financial crisis compared with the battering endured by the US and the European Union.

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If geography largely unites these countries (with the obvious exception of Brazil), it is much harder to say whether they have common agendas. China and Russia certainly regard the SCO as a means to shut the US out of Central Asia, their shared “back yard”, but both are rivals for access to the region’s vast energy resources.

They view the SCO as a potential counterweight to Nato, in political terms at least, but the mechanisms do not exist for a projection of serious co-ordinated military power across the region — even if they could agree on an objective. Russia, which holds the SCO’s rotating presidency, is pressing a security agenda to counter threats from terrorism, particularly Islamic extremism, and drug trafficking from Afghanistan.

The Bric states are determined to break up the cosy club of the G8 economies. Celso Amorim, Brazil’s Foreign Minister, declared the death of the G8 in Paris last week, saying: “It doesn’t represent anything any more.”

Talk of supplanting the dollar as the global reserve currency with regional alternatives such as the Chinese yuan or the Russian rouble is still far from practical. But it is no longer unthinkable, a measure of how much the global architecture is shifting.

Russia craves the restoration of its international status as the dominant power in the former Soviet region and through its leadership with China in the two organisations. The former Communist rivals have never been on better terms, evidenced by booming trade and a state visit to Moscow by President Hu immediately after the two summits.

Whatever the hurdles to co-ordinated action by the countries gathered in Yekaterinburg, the model of authoritarian prosperity espoused by many members of the two blocs is a challenge to Western notions of progress. The US and the EU can only watch, uninvited, from outside as these powers of the non-Western world debate their visions of the political and economic future.

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From The Times
June 17, 2009
Brazil, Russia, India and China form bloc to challenge US dominance

Tony Halpin in Yekaterinburg

With public hugs and backslaps among its leaders, a new political bloc was formed yesterday to challenge the global dominance of the United States.

The first summit of heads of state of the BRIC countries — Brazil, Russia, India and China — ended with a declaration calling for a “multipolar world order”, diplomatic code for a rejection of America’s position as the sole global superpower.

President Medvedev of Russia went further in a statement with his fellow leaders after the summit, saying that the BRIC countries wanted to “create the conditions for a fairer world order”. He described the meeting with President Lula da Silva of Brazil, the Indian Prime Minister, Manmohan Singh, and the Chinese President, Hu Jintao, as “an historic event”.

The BRIC bloc brings together four of the world’s largest emerging economies, representing 40 per cent of the world’s population and 15 per cent of global GDP. The leaders set out plans to co-operate on policies for tackling the global economic crisis at the next G20 summit in the US in September.

“We are committed to advance the reform of international financial institutions so as to reflect changes in the world economy. The emerging and developing economies must have a greater voice,” they said.

The BRIC states also pledged to work together on political and economic issues such as energy and food security. Co-operation in science and education would promote “fundamental research and the development of advanced techologies”.

The declaration also satisfied a key Kremlin demand by calling for a “more diversified international monetary system”. President Medvedev is seeking to break the dominance of the US dollar in financial markets as the world’s leading reserve currency.

He favours the establishment of more regional reserve currencies, including the Russian rouble and the Chinese yuan, to prevent economic shocks. Mr Medvedev said: “The existing set of reserve currencies, including the US dollar, have failed to perform their functions.”

The declaration made no specific mention of the dollar, an indication of China’s reservations about the Russian idea. Beijing holds almost $2 trillion in foreign currency reserves and a large portion of US debt.

The BRIC summit coincided with a two-day meeting of the Shanghai Co-operation Organisation (SCO) in Yekaterinburg, which further underlined the determination of Moscow and Beijing to assert themselves against the West.

The SCO comprises Russia, China and the Central Asian states of Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan. Iran, Pakistan, India and Mongolia have observer status and President Karzai of Afghanistan attended the summit as a guest.

Iran’s embattled President, Mahmoud Amadinejad, defied protests at home to attend the conference, where he hit out at the US and declared that the “international capitalist order is retreating”. But he beat a swift retreat from the summit just hours after arriving, cancelling a planned press conference to return to the crisis in his country.

China pledged $10 billion in loans to Central Asian countries struggling in the economic crisis, adding financial muscle to its leading role in the SCO. Russia and China regard the organisation as a means to restrict US influence in their Central Asian “back yard”.

Mr Medvedev held separate meetings about the situation in Afganistan with President Karzai and President Zardari of Pakistan, a clear signal to President Obama not to ignore Russian interests as he presses US policy in the region in the fight against the Taleban.

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June 17th, 2009
India, China leaders move to ease new strains in ties

Post a comment (2)
Posted by: Sanjeev Miglani
Tags: India: A billion aspirations, Brazil, China, hu jintao, India, prime minister manmohan singh, Russia, shanghai cooperation organisation




While Indian Prime Minister Manmohan Singh’s meeting with Pakistani President Asif Ali Zardari in Russia captured all the attention, Singh’s talks with Chinese President Hu Jintao may turn out to be just as important in easing off renewed pressure on the complex relationship between the world’s rising powers.

India said this month it will bolster its defences on the unsettled China border, deploying up to 50,000 troops and its most latest Su-30 fighter aircraft at a base in the northeast.

While upgrading the defences has been a long-running objective, the timing seemed to suggest New Delhi’s renewed fears of “strategic encirclement” by China by deepening ties with all of its neighbours, not just Pakistan but also Sri Lanka and Nepal.

The chief of the Indian air force, reflecting the anxieties in the security establishment, said China was a far bigger threat than Pakistan because so little was known about Beijing’s combat capabilities.

Predictably enough, the Indian military moves and statements drew a strong response from China’s official media warning that New Delhi’s tough new posture was dangerous if it thought it would compel China to cave in. Beijing was in a different league, both in terms of national power, economic scale and global influence, the media said.

On Monday, Hu and Singh met on the sidelines of the Shanghai Cooperation Organisation and the BRIC meeting that followed in the Urals city of Yekaterinburg. Details from the meeting were sketchy, but the Press Trust of India said the two leaders supported an early meeting of a joint economic group to push trade ties.

They also touched on the border dispute at the heart of the more than four decades of distrust, noting that top negotiators were due to meet in August. The People’s Daily said Hu stressed on expanding economic cooperation and investment flows and aims to take bilateral trade to $60 billion in 2010. It stood at $51.8 billion in 2008, the paper said.



India’s decision to attend the SCO, where it has observer status, was also a step forward. Since its inception the forum has been seen in India as China-centric with the main strategic objective of limiting U.S. dominance on China’s periphery and in that way prevent the hemming-in of both China and Russia.

By attending the summit is New Dehi signalling its intention to engage China on a broad front and not shy away?

And did Beijing shift ground a bit by acceding to the declaration by the BRIC - Brazil, Russia, India and China - calling for U.N. reform and saying that the grouping understood and supported India and Brazil’s aspirations to play a greater role in the United Nations.

Both Brazil and India are candidates for permanent members of the Security Council and Beijing has long been cold to the idea of at least its southern neighbour getting a place on the high table. It wasn’t a ringing endorsement at Yekaterinburg but perhaps the first shuffling of chairs?

[Manmohan Singh and Hu Jintao at the SCO summit and a Chinese soldier at the border]

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China's Hu praises Russia ties at Putin meeting

7 hours ago


Russian President Dmitry Medvedev (R) shakes hands with Chinese President Hu Jintao

NOVO-OGAREVO, Russia (AFP) — Chinese President Hu Jintao said that relations with Moscow would always be a "priority" for Beijing, at a meeting with Russian Prime Minister Vladimir Putin.

"China will always look at its relations with Russia as a priority of its foreign policy," Hu said in opening remarks at the meeting at Putin's residence outside Moscow.

"In the midst of the global financial crisis, we are actively developing relations in every sphere. In this way we have reached a new level," he said, speaking through a translator.

Hu also praised the "very honest intergovernmental relations between our countries."

Putin welcomed Hu and noted that the Chinese leader had made "constructive proposals" during a summit of the Shanghai Cooperation Organisation (SCO) earlier this week in the Russian city of Yekaterinburg.

"I carefully reviewed your speech at the SCO summit. There were some constructive proposals in the infrastructure and financial spheres," he said.

SCO is a regional grouping of Russia, China and four Central Asian countries that has been seen as a potential counterweight to Western-led international organisations like NATO.

"Despite the global financial crisis the relations between our countries are immune to economic or political ruptures," Putin said.

The two leaders were to oversee an intergovernmental meeting on Wednesday and Hu was scheduled to meet Russian President Dmitry Medvedev later in the day.

Ties between Moscow and Beijing have warmed in recent years after a period during the Cold War when the two giant neighbours were rivals for supremacy in the Communist world.

Last year the two countries signed a landmark deal to build a pipeline connecting Siberian oil fields to energy-hungry China. Beijing has been eager to obtain greater access to Russia's immense energy resources.

Copyright © 2009 AFP. All rights reserved. More »

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Russia, China to Promote Ruble, Yuan Use in Trade

By Lyubov Pronina and Alex Nicholson

June 17 (Bloomberg) -- The leaders of Russia and China agreed to expand use of the ruble and yuan in bilateral trade to lessen dependence on the U.S. dollar a day after they took part in the first summit of the so-called BRIC countries.

“We agreed to take further steps in this direction, including, perhaps, by adjusting contracts and laws that already exist,” Russian President Dmitry Medvedev told reporters in the Kremlin today after talks with his Chinese counterpart Hu Jintao.

Russia, the world’s biggest energy supplier, wants to start selling oil to China in rubles, said Deputy Prime Minister Igor Sechin, who is also chairman of OAO Rosneft, Russia’s biggest oil company. Energy sales in rubles are a “strategic” issue for Russia, he said, adding that oil exports to China over the next 20 years will surpass $100 billion.

Brazil, Russia, India and China agreed yesterday to push for more clout in global financial institutions during what Medvedev called BRIC’s “historic” first summit in the Ural Mountains city of Yekaterinburg. China and Russia have called for a more diversified financial system to give emerging economies a bigger say in economic affairs, including the creation of alternatives to the U.S. dollar as a reserve currency.

‘Symbolic Value’

“Expanding the use of national currencies in mutual settlements is a separate, important task,” Medvedev said. China has the world’s biggest foreign-currency reserves, almost $2 trillion, while Russia is third with more than $400 billion.

The ruble weakened 0.1 percent to 31.2396 against the dollar in Moscow today after earlier strengthening as much as 0.4 percent. The yuan was little changed against the dollar on speculation China will prevent appreciation to avoid a prolonged slump in the nation’s exports.

It will take “at least a couple of years” to start converting the first contracts into domestic currencies, said Elina Ribakova, Citigroup Inc.’s chief economist in Moscow.

Today’s announcement has “important symbolic value,” she said. “If you take a 10- or 20-year perspective, trade between Russia and China will increase significantly.”

Total trade between the neighboring countries reached a record $56.8 billion last year, according to the Kremlin.

After today’s Moscow meeting, Russia and China signed an agreement worth $3 billion to cooperate in trade and investment in areas including light industries, high technology and energy.

U.S. Deficit

The dollar’s status has come into question as leaders of the BRIC nations consider substituting other assets for their dollar holdings amid a ballooning budget deficit that keeps the U.S. dependent on foreign financing. China alone owns about $744 billion of U.S. Treasury bonds among its $2 trillion of foreign- exchange reserves.

Russian central bank First Deputy Chairman Alexei Ulyukayev’s comment on June 10 that Russia may sell some of its U.S. bonds to buy International Monetary Fund notes helped push 10-year yields on Treasuries to the highest level since October.

Brazilian President Luiz Inacio Lula da Silva today denied that BRIC leaders discussed buying each other’s bonds at the Yekaterinburg summit, after Medvedev’s top economic adviser said the matter might be discussed.

Dollar bonds sold by China earned 11.4 percent in the past year, more than double the 4.6 percent for debt in yuan, JPMorgan Chase & Co. indexes show. Brazil’s U.S. currency bonds returned 3.6 percent as real-based notes lost 4.9 percent, and Russia’s dollar bonds outperformed with a 1.9 percent loss compared with a 7 percent drop in ruble debt. India doesn’t have dollar-denominated debt.

To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net; Alex Nicholson in Moscow at anicholson6@bloomberg.net

Last Updated: June 17, 2009 10:26 EDT

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Emerging powers try to wean themselves off U.S. dollars
national post ^
Posted on Wednesday, June 17, 2009 3:09:44 AM by FromLori

Leaders of emerging world powers discussed creating a new global order on Tuesday, one less dependent on the United States and the West.

Existing reserve currencies, including the U.S. dollar, had not performed their function and it was time for change, said Russian President Dmitry Medvedev as he hosted a summit of the so-called BRIC nations of Brazil, Russia, India and China.

"We are likely to witness the creation of a supranational reserve currency ... which will be used for international settlements," Mr. Medvedev said. "The existing currency system is not ideal." Countries should use their national currencies more for trade, he added.

(Excerpt) Read more at nationalpost.com ...

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Mexico Wants to Join BRIC IMF Bond Scheme



Mexico’s central bank reportedly intends to buy IMF bonds, following similar announcements by China, India and Brazil.

While some may question this use of dwindling reserves at a time when the economy is under such severe pressure, analysts say it is a good idea. Alfredo Thorne, MD of economic and policy research at JPMorgan, says that doing so would allow the central bank to reduce exposure to the US dollar in favor of more stable IMF special drawing rights.

He adds that he has heard Mexico might purchase $25bn in the bonds, versus Brazil’s $10bn bid. The country’s reserves total $75bn, versus Brazil’s roughly $200bn.

Walter Molano, an analyst with BCP, says that by acquiring IMF bonds, Mexico – as well as the other countries interested in doing the same – can have more say in how the fund operates.

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Medvedev urges ‘fairer global order’

By Isabel Gorst in Yekaterinburg
Published: June 16 2009 19:45 | Last updated: June 16 2009 19:45

Presidents Lula da Silva of Brazil, Medvedev of Russia and Hu of China wait for Manmohan Singh, Indian premier, to join them for a summit photograph

Dmitry Medvedev called on Tuesday for a “fairer global economic order” after leaders of the four biggest emerging economies held their first formal summit.

He described the Russian city of Yekaterinburg, where the talks were held, as “the epicentre of world politics”, adding that the need for developing world nations to meet in new formats was “obvious”.

Talks between the leaders of the Bric group, Brazil, Russia, India and China, focused on the search for measures to ease the global financial crisis while seeking a greater role for emerging economies in a multi*polar world.

Bric countries account for 40 per cent of the world’s population and 15 per cent of its economy. They believe they should have a greater say in global policymaking and in currency markets. A communiqué issued at the end of the summit, which expressed broad themes rather than detailed proposals, said emerging economies should have “a greater voice and representation” and pointed to the need for a “diversified, stable and predictable currency system”.

It also called for “comprehensive reform” of the United Nations to deal with global challenges more effectively and give Brazil and India a greater role. Russia and China are already permanent members of the Security Council.

Russian officials strongly criticised the global financial infrastructure, saying the dominance of the US dollar risked instability in currency markets.

Mr Medvedev said the “existing set of reserve currencies had failed to perform their functions”.

Arkady Dvorkovich, Mr Medvedev’s chief aide, said the International Monetary Fund’s basket of Special Drawing Rights should be expanded to include the Chinese currency and those of commodity producers including Russia, Australia and Canada, and possibly gold.

“We don’t need a shock on the currency market. No one wants to break the dollar,” he said.

China, which holds nearly $2,000bn (€1.4bn, £1.2bn) in foreign currency reserves, was silent on the subject, nor was it mentioned in the communiqué.

Bric leaders also discussed global food and energy security and measures to prevent climate change.

Mr Dvorkovich said Bric countries, none of which is bound by the international Energy Charter, would strive to develop a just legal system to govern energy projects.

Early in the day Russian officials said Yekaterinburg, where Russia has invested heavily in new conference facilities, should host all future Bric summits.

But Russia, China and India later accepted Brazil’s offer to host the next summit in 2010. Bric leaders will meet informally on the sidelines of the G20 summit in Pittsburg in September.

Sergey Ryabkov, Russia’s deputy foreign affairs minister, played down the importance of Bric, saying the group was “at an early stage of its evolution”.

Elena Sharipova, a financial analyst at Renaissance Capital, said: “Bric’s transformation into a real international structure is a long way off, but it is clearly emerging as a new power centre.”

Copyright The Financial Times Limited 2009

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BRIC examining alternatives to dollar

Siddharth Varadarajan
Thursday, Jun 18, 2009

On board Air India One: Brazil, Russia, India and China are reviewing the continuing role of the United States dollar as the primary international reserve currency, Prime Minister Manmohan Singh confirmed on Tuesday in remarks that are likely to fuel further speculation about the geopolitical implications of greater cooperation between the BRIC countries.

He was speaking to reporters en route to New Delhi after attending the maiden summit of BRIC in the Russian city of Yekaterinburg.

Asked whether the reference in the BRIC joint statement adopted on June 16 to the “need for a more diversified international monetary system” was an implicit call to search for alternatives to the dollar, Dr. Singh said those were ideas which were aired but no concrete conclusion emerged.

“It was agreed that these are highly complex issues, replacing the dollar by other currencies – which other currencies, national currencies or an SDR – and it was felt this matter requires further examination by our finance ministers and governors of the central banks.”

In the run-up to the summit, Russia, China and Brazil had made varying degrees of noise about the need to look beyond the greenback but the BRIC leaders decided not to foreground the debate until their own financial and banking experts were clearer about the implications of a new regime.

Dr. Singh also expressed the hope that BRIC would not be a “talk shop.” “We are responsible for 40 per cent of global output and population. If all these countries act together in concert, their voice will be heard in the global councils.”

He said it was too early to speak of giving BRIC a concrete structure or thinking about its expansion. “It is the first meeting of group at the summit level. This is an evolving situation; not a one-time operation. We are meeting next year to take stock.”

Asked about his interest in joining the Shanghai Cooperation Organisation – whose summit India attended as an observer on Tuesday – as a full member, the Prime Minister said he believed it was for others to decide. “If they feel India would be useful as a member, we would welcome it. But I am not lobbying for it.”

Extended neighbourhood
He described Central Asia as a part of India’s extended neighbourhood.

Kazakh President Nursultan Nazarbayev was the chief guest at the Republic Day parade this year and India was looking to speed up energy cooperation with Astana, especially in the nuclear and hydrocarbon sectors.

Dr. Singh also mentioned having a good discussion with Emomali Rakhmon of Tajikistan. The Tajik president had invited him to visit his country, he said.

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American Media Ignores Major Economic Meeting


By admin, on June 21st, 2009
From LinkTV

June 19 — The BRIC and the SCO — ever heard of them? BRIC is Brazil, Russia, India and China. “The most dangerous institution the American people have never heard of” is the SCO, some have said — and it just got more dangerous.

The Shanghai Cooperation Organization played host to the world’s top four economic dynamos — Brazil, Russia, India and China, known as BRIC. The U.S. media, allergic to international conferences without Americans in attendance, continue to not report on this very important story.

Sources: CCTV, China; Russia Today, Russia; Al Jazeera English, Qatar; SIC Noticias, Portugal; Todo Noticias, Argentina
See more on the SCO here.

More on the BRIC meeting and decisions here.

Does CNN care? Nah. No Americans were there. How important can it be?

See also: “What This Weeks BRIC Meeting Means For The US Dollar“

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BRIC summit marks frustration with dollar


June 20, 2009





By Salman Ansari Javid

The first summit of the so-called BRIC group – Brazil, Russia, India and China – was held on Tuesday in the Russian city of Yekaterinburg to discuss how they can exert more control over the global financial system.

The BRIC countries comprise about 15 percent of the world economy and, more important, have about 40 percent of global currency reserves (combined reserves of $2.8 trillion according to Bloomberg.com). The group is united in their frustration with the dollar’s status as the world’s reserve currency, which enables Washington to run budget deficits without fears of facing the kind of budgetary day of reckoning that other countries risk.

Supranational currency

Earlier, Russian President Dmitri A. Medvedev and Chinese President Hu Jintao attended the SCO summit which also includes the four former Soviet republics of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. The SCO meeting was also attended by President Mahmoud Ahmedinejad. Although not a member, Iran has observer status at the SCO summits. The Russian leader reiterated his intention to push for the creation of a “supranational currency” to challenge the dollar and encouraged China and called on other Shanghai group members to use each other’s currencies for trade.

“There can be no successful global currency system if the financial instruments that are used are denominated in only one currency,” Medvedev said. “Today this is the case and the currency is the dollar.” About 30 percent of Russia’s international reserves, which stand at $409.5 billion, are currently held in U.S. Treasuries. On the other hand China has invested $1 trillion in American government bonds or debt.

The excess dollars are held in foreign central banks leaving the reserve holders with only two choices: reinvesting the dollars in U.S. securities or holding them and facing an increase in the value of their own currencies, which makes their products more expensive and less competitive in the world market.

In the past decade, with the exception of the last few months, we witnessed a steady decline in the value of the greenback as the price of oil soared alongside. Many analysts partially blame today’s global economic crisis on the fluctuations in the U.S. dollar.

In March, the prime minister of China, Wen Jiabao, expressed concerns about United States budget deficits, suggesting they might lead to inflation, a weaker dollar and rising yields on Treasuries, any one of which would hurt China’s $1 trillion investment in American government debt. Later that month, the head of the Chinese central bank called for a new international currency to replace the dollar.

China, Brazil and Russia have said recently that they will purchase notes from the International Monetary Fund to begin diversifying their reserves.

At the moment, there is no immediate alternative to the dollar for international trade. No other markets in the world, including EU which is also the world’s largest market, has the depth and liquidity of those in the U.S.

Local currency

Today, there is a growing tendency towards using local currencies for commodity transactions. Brazilian President Luiz Inacio Lula da Silva and his Chinese counterpart Mr. Hu first discussed the idea of replacing the dollar with the renminbi and real (Chinese and Brazilian currencies) when they met in the G-20 Summit in London in April.

In a meeting in May, during Mr. Lula’s visit to China the two leaders followed up on their earlier conversation in the G-20 Summit to work towards using their local currencies for trade transactions.

Other countries are taking similar measures of using national currencies for trade transaction. This month the state-run Iranian Bank Mellat opened a Turkish lira special account in its Istanbul branch to streamline two-way trade based on national currencies, rial and lira.

The two sides formerly held talks over the use of national currencies in bilateral trade to double their annual trade volume which hit $10 billion in 2008.

According to Turkish daily Zaman, Turkey is currently in negotiations with Russia over the use of the local currency in mutual trade.

Although the amount of trade between the BRIC members is not significant at the moment but it is growing. Brazil announced this year that China has surpassed the U.S. as its largest trading partner and said last month that they would look for ways to finance their trade without the dollar.

So far there has been no consensus on what a new financial system should look like. China’s dependence on exports to the U.S. and EU and its enormous holdings of dollar-dominated assets give it a vested interested in the status quo, leaving China’s leaders reluctant to pursue far-reaching changes.

Due to the lack of an alternative to the U.S. dollar the likelihood of a “supranational currency” emerging any time soon is unlikely. However, just the fact that such a large group can have a summit without the presence of American or European leaders is a start.

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BRIC & SCO summits: Reinventing the wheel

Written by Eric Walberg

A new world is being born, one without the US dollar greasing the wheels of commerce, notes Eric Walberg Yekaterinburg, famous tragically as the spot Lenin chose to have the Tsar and his family executed in 1918, and ironically as the fiefdom of Boris Yeltsin, who finished off the Russian revolution itself in 1991, witnessed something no less remarkable last week when leaders of the so-called BRIC nations (Brazil, Russia, India and China) held their first summit, following the yearly meeting of the Shanghai Cooperation Organisation (SCO). The BRIC countries comprise 15 per cent of the world economy, 40 per cent of global currency reserves and half the world’s population. Brazil, India and China have also weathered the financial crisis better than the world as a whole. Holding the two meetings together meant that Indian Prime Minister Manmohan Singh attended the SCO for the first time. The SCO, Russian and China ’s Eurasian security organization, has become a key counterweight to US hegemony in the world, and Russia and China are eager to have India upgrade its position of observer to member. This summit appeared to have coaxed India a step closer, as the SCO security agenda has shifted its emphasis to the growing security threat from Afghanistan, which satisfies the more pro-US India . But the headline-stealer was the BRIC summit. While the US plays its tiresome geopolitical games on Russia ’s eastern borders, Russian President Dmitri Medvedev was busy charting a new economic and political reality in the heart of Eurasia. “The artificially maintained unipolar system”, he lectured, is based on “one big centre of consumption, financed by a growing deficit and ... one formerly strong reserve currency.” At the root of the global financial crisis, he concluded, is that the US makes too little and spends too much. Especially upsetting for Russia is its continued military largesse to Georgia, the missile shield in Eastern Europe and its invasions of Iraq and Afghanistan. “The summit must create the conditions for a fairer world order,” he read out, as Presidents Hu Jintao of China, Luiz Inacio Lula da Silva of Brazil and the Indian prime minister looked on approvingly. China backs Russia’s two big gripes with the US: “The security of some states cannot be ensured at the expense of others, including the expansion of military-political alliances or the creation of global or regional missile defense systems,” the joint Chinese-Russian statement says. Chinese leader Hu Jintao also joined Medvedev in denouncing US plans to militarise outer space: “Russia and China advocate peaceful uses of outer space and oppose the prospect of it being turned into a new area for deploying weapons ... The sides will actively facilitate practical work on a draft treaty on the prevention of the deployment of weapons in outer space, and of the use of force or threats to use force against space facilities.” Iranian President Ahmedinejad, fresh from trouncing his pro-Western rival in presidential elections, dotted the “i”s at the SCO meeting, taking a leaf from Venezuela ’s Hugo Chavez: “The international capitalist order is retreating. It is absolutely obvious that the age of empires has ended and its revival will not take place.” But there was more than colourful rhetoric in all this, despite the pooh-poohing of Western pundits, who deride the SCO and BRIC as a collection of misfits and wannabes. The BRICs have put the US dollar on notice, and are already finding alternatives as a means of clearing accounts. Medvedev called for the IMF to include the Russian ruble and the Chinese yuan in the basket of currencies used to value its financial products. But that is just for starters. Chinese Central Bank governor Zhou Xiaochuan says the goal is now to create a reserve currency “that is disconnected from individual nations.” Even more ominous for the threadbare dollar, though perfectly sensible in the computer age, is the revival of stone-age barter on a big scale, which bypasses the need for any reserve currency at all. Brazil’s biggest trading partner, once the US, is now (surprise) China, and they are using barter deals to settler their accounts, bypassing the dollar altogether. Two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in yuan. As dollars are the world’s default reserve currency today, the US government can churn them out at will to paper over its massive foreign debt and budget deficit, effectively letting it steal other countries assets legally and forcing countries everywhere to finance its military spending. China, Russia, Brazil and now India are well aware of this, have had enough, and have the international heft to do something about it. For them, the US is the ultimate rogue nation. How else to characterise a country that insists other countries follow one set of laws – on war, debt repayment and treatment of prisoners – but ignores them itself? The US is now the world’s largest debtor yet has curiously avoided the pain of “structural adjustments” that the IMF imposes on other debtor economies, refusing to cut its bloated military budget or increase taxes meaningfully. “The world economy should not remain entangled, so directly and unnecessarily, in the vicissitudes of a single great world power,” said Roberto Mangabeira Unger, Brazil’s minister for strategic affairs. The US can never “repay” the $4 trillion debt it owes foreign governments, their central banks and the wealth funds set up precisely to dispose of the global dollar glut. “ America has become a deadbeat – and indeed, a militarily aggressive one,” notes Michael Hudson. The problem is how to contain it. Rumblings are coming not only from fringe peaceniks. Yu Yongding, a former Chinese central bank advisor now with China’s Academy of Sciences, advises US Treasury Secretary Tim Geithner that the US should save by cutting back on its military spending. “US tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars’”. The BRICs are trying to organise their affairs so that they are no longer the unwilling recipients of dollars. No matter what they think of the US, they hasten to insist they don’t want to see the US dollar collapse, since they hold most of their own reserves in dollars. But they are beginning to withdraw the life-support system the US has been relying on since Nixon completed the transition from a gold-based reserve currency to a purely paper one in 1971. Just to emphasise how serious the situation is, according to the Financial Times, the top 5 financial institutions by market capitalisation in 1999 were, in order, Citigroup (US), Bank of America (US), HSBC (UK), Lloyds TSB (UK), Fannie Mae (US). The top 5 as of 2009 are Industrial & Commercial Bank of China, China Construction Bank, Bank of China, HSBC (UK), and JPMorgan Chase (US). From 0:3 to 3:1 for China, now officially the world’s second largest economy after the US – a rout. Just as countries are beginning to rediscover age-old barter, fixed, pegged and dual exchange rates are also being considered, mechanisms once derided as passe. In the face of continued US overspending, de-dollarisation will force countries to return to nationally determined fixed exchange rates and dual exchange rates – one exchange rate for commodity trade, another for capital movements and investments. The world is discarding its sixty-year old framework, though the historic meetings in Yekaterinburg elicited only a collective yawn from most media. “Between the BRIC countries, there is really little in common,” said Yevgeni Yasin, head of research at the Higher School of Economics in Moscow. “Each of them has its own destiny, its own special character, and it will be much more difficult for them to agree among themselves than separately with Western countries.” China depends on manufactured exports to the US and Europe. Russia sells oil, natural gas and other natural resources. Brazil relies on agricultural exports, while India’s growth has been largely based on its domestic market. However, Jeng Fengin at the Chinese Institute of Modern-Day International Relations is less blase: “The financial crisis has given a much-needed boost to the fledgling partnership between Brazil, Russia, India and China and helped our voice to be heard everywhere.” President of the Brazil-Russia Chamber of Commerce, Industry and Tourism Gilberto Ramos warned sceptics that the BRIC countries are all powers of a truly continental scope and have very much in common, both geographically and macroeconomically. In case Obama hasn’t noticed, Eurasia is coalescing, not around littler Georgia and big brother Poland, with their pretensions as forward bases for the mighty US empire, but around China, Russia and India. He would do well to remember Yekaterinburg is not only famous for its Russian past, but for Gary Powers, the US spy shot down in 1960, a fitting metaphor for how Russia and China are taking aim at the US-dominated international financial order.

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IMF sets terms for long-awaited bond issuance

Wed Jul 1, 2009 4:47pm EDT

(Recasts throughout with outcome of board meeting)

By Lesley Wroughton

WASHINGTON, July 1 (Reuters) - The International Monetary Fund on Wednesday set the terms for its long-awaited plan to issue debt, a program it hopes will boost its own resources and bring emerging economic powers more into its fold.

Under a framework agreed by the IMF board on Wednesday, the notes will have a maximum maturity of five years and once purchased by member countries, can be traded among central banks.

China has already committed to purchase $50 billion in the notes, and Russia and Brazil up to $10 billion each, part of an agreement among Group of 20 member countries to increase IMF resources by $500 billion.

"Under the framework, members may sign agreements to purchase IMF notes up to a limit set by the member," the IMF said in a statement.

An IMF official said the board did not set a cap on the amount of debt the fund could issue. Earlier, sources said staff had recommended the IMF issue no more than $150 billion in debt.

It is the first time that the Washington-based institution has agreed to issue debt. A similar idea was proposed in the 1980s but failed to win enough support among member countries.

It is also the first time that emerging market countries have contributed to increasing funds for IMF lending in addition to their IMF subscriptions, or quotas, which generate most of the Fund's resources.

"We do not see this as a permanent solution to raising resources for the IMF. That should be done through a more equitable distribution of quotas," a source from a major emerging market country told Reuters.

Emerging market countries are pushing for more voting power in the IMF through an increase in their quotas. (Reporting by Lesley Wroughton; Editing by Diane Craft and Dan Grebler)

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Chinese wanna BUY another $80 Billion in GOLD!!!

Nine weeks ago, the Chinese government admitted to the mainstream media that it had added 14.6 million ounces of gold reserves from 2003 through 2009. For years before that disclosure, several of us non-mainstream media members had reported this activity to smaller audiences.

It wasn't until about June 9 that the mainstream media was told that the Chinese government was planning to purchase an additional huge quantity of gold. The information became public when U.S. Rep. Mark Kirk (R-Ill.) was interviewed on Fox News by Greta Van Susteren.

Kirk accompanied Treasury Secretary Timothy Geithner on his trip to China in May. While the Chinese were laughing at Geithner during his speech at Beijing University for claiming that the U.S. dollar was strong (By the way, laughing at a speaker is a major social no-no in China, a sign that Geithner's comments were not respected at all!), Kirk was engaged in a private conversation with lesser Chinese officials. In this non-public discussion, Kirk was told that the Chinese were extremely concerned about the likely near term decline in the U.S. dollar because of the explosion of government debt. As part of the reaction to this concern, the Chinese government had established another reserve to stockpile petroleum and was planning to purchase another $80 billion of gold (about 85 million ounces at today's price level).

Kirk's revelation about the Chinese plan to purchase another $80 billion of gold was the very last comment in the interview. This extraordinary news received almost no coverage until last week when multiple hard-asset Web sites picked up the interview.

This information is not fresh news, even though the mainstream media did not report it until Kirk's interview. For instance, I discussed the substance of it in the April 28 edition of this column. Let me repeat the relevant paragraph for you:

"By the way, the way the Chinese government operates is not open and direct. Changes in policy are signaled by speeches or papers by lesser officials. And [as] has been shown repeatedly, when the Chinese government issues a statement that it is considering something such as purchasing gold, they really mean that they have already been actively doing it. It is entirely possible that China's central bank gold reserves are much higher than they now confirm."

So, when the Chinese, by their indirect method, disclosed that they plan to purchase another $80 billion of gold, you can just about guarantee two facts. First, the Chinese are already buying this gold. Second, the amount of gold planned to be purchased is larger than they stated.

How much is 85 million ounces of gold in relation to anything? The potential International Monetary Fund (IMF) gold sale that has been bantered about since 2002 as a means to knock down the price of gold is less than 13 million ounces. Annual worldwide gold mine production is roughly 60 million ounces. The Central Bank Gold Agreement, covering governments, central banks, and official organizations such as the IMF that hold about 80 percent of the world's official gold holdings, limits annual sales to 16.1 million ounces.

How can the Chinese accumulate this much more gold without the spot price rising significantly? The simple answer is that this is not possible. The price of gold is going to have to rise by a lot, much faster than mainstream financial experts want us to believe. The price will not rise in a straight line, but the longer you wait for any 'pullback' to offer a buying opportunity, the greater your risk that you might not be able to purchase anywhere close to current gold price levels.

This past weekend, I attended the International Paper Money Show in Memphis, Tenn. I was surprised how many dealers, whose livelihood does not involve trading gold at all, told me that they regularly read this column and have personally laid in a good stash of physical gold for their own protection.

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Eastern economies eventually will overtake West in size

July 7, 2009

LEADERS of Brazil, Russia, India and China, the leading emerging economies of the world known as BRICs, had their first summit in the Russian city of Yekaterinburg on June 16. Russian President Dmitry Medvedev declared his meeting with Brazil's President Luiz Inacio Lula da Silva, India's Prime Minister Manmohan Singh, and China's President Hu Jintao as an "historic event" and Yekaterinburg as a new "epicenter of world politics."

The BRICs, a term coined by Goldman Sachs chief economist Jim O'Neill in 2001, together account for 42 percent of the world's population, almost 22 percent of the world economy, and contribute more than half of global economic growth.

Economically, China is about to overtake Japan to become the second largest economy in the world, while Brazil and Russia have overtaken Canada and India is going to do so very soon. "By some predictions," Andrew Kramer of New York Times reports, "these four largest emerging economies will surpass the current leading economies by the middle of this century, a tectonic shift that by this reckoning will eventually nudge the United States and Western Europe away from the center of world productivity and power."

Financially, the BRICs demand a "reformulation and reorganization of the world financial system," according to Brazilian Economy Minister Guido Mantega. More specifically, the BRICs believe the world financial system set up by the 1944 Bretton Woods agreement was outdated and must be reformed to take into account the greater economic importance of emerging powers. As the BRICs put the blame for the current crisis on the world's most advanced economies, they want a significant increase in their representation in the World Bank and International Monetary Fund and a significant reduction of the world's reliance on the dollar as the global reserve currency.

Politically, Russia's choice of Yekaterinburg, scene of the execution of Tsar Nicholas II, as the first BRIC summit may be telling. The Yekaterinburg Summit ended with a declaration calling for a "multi-polar and fairer world order," a diplomatic code for the refusal of the U.S. as the world's superpower.

The BRIC summit also coincided with another summit in Yekaterinburg, the ninth Summit of Shanghai Cooperation Organization. The SCO comprises Russia, China, Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan, with Iran, Pakistan, India and Mongolia as its observers. Its Yekaterinburg meeting, as Tony Halpin of The Times noted, "further underlined the determination of Moscow and Beijing to assert themselves against the West."

There is no doubt that BRIC nations, especially China and Russia, are getting bolder and would like to increase their own weight and influence in international system at the expense of the U.S. and the West. The question is: Can the BRICs really form a new "epicenter of world politics" to change the current global economic and political structure?

The answer is: No.

While the BRIC summit at Yekaterinburg is indeed a sign that relations between the traditional dominating powers and new "emerging economies" are about to undergo some restructuring, with the U.S. global position undermined by the current crisis, the new grouping is not particularly homogenous and their "alliance" far from solid. Despite a shared wish to gradually reduce their reliance on the dollar, China and India have significant conflicting interests. As Chan Akya of Asia Times points out, internal tensions and "what is at stake between China and India often presents its own dynamic of how far away is the point at which these nations can actually rely on each other."

Brazil, having been on everyone's list of growth economies for the last century, is just beginning to make its potential. It remains primarily a regional power with few geopolitical interests beyond Latin America. Russia, the host of the BRIC summit, is "nothing more than a random beneficiary of clever Goldman Sachs acronym creation," said Martin Hutchinson, contributing editor of Money Map Report.

Unlike the other three in the group, argues Akya, Russia is a country that "is heavily trapped in its own history, a country that cannot quite decide whether it will play well with its neighbors or simply go out to bomb them."

At least in the short-run, therefore, the internal dissent and the lack of any vision dictates that the BRICs' will not be able to overhaul the existing global architecture. The Yekaterinburg Summit, however, does set a stage for growing clash of interests and even potential greater conflicts between the U.S. and the West and some of these rising powers, especially in the economic arena.

- Dr. Xiaoxiong Yi is a professor at Marietta College and Director of the China Program.

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Russia, China to push global currency at G8 summit

Tue Jul 7, 2009 4:39pm EDT












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By Stephen Brown

ROME (Reuters) - China, Russia and Brazil will use this week's G8 summit in Italy to push their view that the world needs to think about a new global reserve currency as an alternative to the dollar, officials said on Tuesday.

As leaders of the Group of Eight rich nations and the major developing powers traveled to Italy for a three-day summit starting on Wednesday, it seemed unlikely the currency debate would get a specific mention in summit documents.

But both G8 member Russia and emerging power Brazil -- which like China and India is a member of the "G5" that joins the second day of the summit on Thursday -- echoed China's calls for the currency debate to be taken up by world leaders.

Top Kremlin economic aide Arkady Dvorkovich said China and Russia would "state their stance that the global currency system needs smooth evolutionary development."

Brazilian President Luiz Inacio "Lula" da Silva said he was keen to explore "the possibility of new trade relations not dependent on the dollar" and India has also said it is open to the debate.

But G8 members Germany, France and Canada played down talk of the summit including a detailed currency discussion. A source at President Nicolas Sarkozy's office said the G8 was "generally not the forum ... for discussing currency exchange rates."

German Finance Minister Peer Steinbrueck said on Monday the dollar was likely to remain the global reserve currency but the Chinese yuan and the euro would slowly gain in significance.

The debate is highly sensitive in financial markets, which are wary of risks to U.S. asset values. China and other nations promoting the debate take care to avoid undermining the dollar, which Lula said would be vital "for decades" to come.

The case of China, which has up to 70 percent of its $1.95 trillion in official currency reserves in the dollar, underlines the fact that the dollar is still the most important reserve currency.

But China believes over-reliance on the dollar has exacerbated the financial crisis and sees the International Monetary Fund's special drawing rights (SDRs), based on a basket of currencies, as a viable alternative for the future.

G8 URGED TO ACT ON POVERTY
Italy's keenness to avoid a repeat of the riots and police brutality that marred the 2001 G8 in Genoa meant security was tight around the earthquake-stricken mountain town of L'Aquila, where leaders will sleep in an austere police training school.

Police arrested 10 people including five French citizens in L'Aquila found with clubs and sticks in their vehicle. In Rome small groups of student protesters clashed with police.

"We want to demonstrate once again against what the G8 represents," said a student giving her name as Maria Teresa.

Pope Benedict issued a document to coincide with the G8, urging leaders to impose tough rules on the financial system.

In the encyclical, he called for "a true world political authority ... to manage the global economy" and avoid more "abuse" of the free market.

Summit host Silvio Berlusconi said G8 talks on Friday with nine African leaders and food agencies would see the launch of a $10-15 billion initiative on food security, to which the United States would pledge $3-4 billion.

PROGRESS ON CLIMATE, TRADE
The G8 talks open with discussion of the economic crisis. Prime Minister Berlusconi is eager to transmit optimism, though his credibility as host is undermined by a prostitution scandal, a poor record on aid and his reputation for diplomatic gaffes.

It did look as though the summit might produce a breakthrough on trade. A draft communique suggested the G8 and G5 would agree to conclude the stalled Doha round of trade talks in 2010. Launched in 2001 to help poor countries prosper through trade, they have stumbled on proposed tariff and subsidy cuts.

With an eye to December's U.N. climate change summit in Copenhagen agreeing a successor to the 1997 Kyoto pact, leaders will also try to narrow differences over cuts in greenhouse gas emissions and funding for low carbon technology.

The aim is to agree to limit the rise in global temperatures since pre-industrial times to 2 degrees Celsius (3.6 Fahrenheit) and strengthen last year's vague "vision" of halving global carbon emissions by 2050.

If also adopted at the 17-member Major Economies Forum talks chaired on Thursday by U.S. President Barack Obama, this would be progress as India and China have resisted the 2050 target.

But Berlusconi introduced a note of caution, saying Europe and Obama wanted to be in the "vanguard" on climate change but he had "encountered strong resistance" from Chinese President Hu Jintao at their meeting in Rome on Monday.

Berlusconi said Iran's post-election violence and nuclear program would be on the agenda, some wanting sanctions and "others saying sanctions never obtained great results."

"Personally I think we will continue to have dialogue," the Italian leader told a news conference.

(Reporting by Reuters bureaux across the world; writing by Stephen Brown; editing by Crispian Balmer and Tim Pearce)

© Thomson Reuters 2009 All rights reserved

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India Joins Russia, China in Questioning U.S. Dollar Dominance

By Mark Deen and Isabelle Mas

July 4 (Bloomberg) -- Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.

“The major part of Indian reserves is in dollars -- that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview yesterday in Aix-en-Provence, France, where he was attending an economic conference.

Singh is preparing to join leaders from the Group of Eight industrialized nations -- the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia -- at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representatives to the summit.
As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.

“There should be a system to maintain the stability of the major reserve currencies,” Former Chinese Vice Premier Zeng Peiyan said in a speech in Beijing yesterday, highlighting China’s concerns about a global financial system dominated by the dollar.

Fiscal and current-account deficits must be supervised as “your currency is likely to become my problem,” said Zeng, who is now the head of a research center under the government’s top economic planning agency. The People’s Bank of China said June 26 that the International Monetary Fund should manage more of members’ reserves.

Russian Proposals
Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar’s future as a global reserve currency. Russia’s proposals for the Group of 20 major developed and developing nations summit in London in April included the creation of a supranational currency.

“We will resume” talks on the supranational currency proposal at the G-8 summit in L’Aquila on July 8-10, Medvedev aide Sergei Prikhodko told reporters in Moscow yesterday.

Singh adviser Tendulkar said that big dollar holders face a “prisoner’s dilemma” in terms of managing their holdings. “That’s why I’m telling them to do this,” he said.

He also said that world currencies need to adjust to help unwind trade imbalances that have contributed to the global financial crisis.

“The major imbalances which led to the current situation, the current account surpluses and deficits, have to be addressed,” he said. “Currency adjustment is one thing that suggests itself.”

Emerging-Market Dependence
For all the complaints about the dollar, emerging markets such as India remain dependent on the currency of the U.S., the world’s largest economy and a $2.5 trillion export market. The IMF said June 30 that the share of dollars in global foreign- exchange reserves increased to 65 percent in the first three months of this year, the highest since 2007.

Tendulkar said that the matter needs to be taken up in international talks, and that it emphasizes the need for those talks to go beyond the traditional G-8.

“They can meet if they want to,” he said. “The G-20 has a wider role, has representation of the countries that are likely to lead the recovery process.”

To contact the reporters on this story: Mark Deen in Aix en Provence, France at markdeen@bloomberg.net; Isabelle Mas in Aix en Provence, France at imas2@bloomberg.net.

Last Updated: July 3, 2009 18:00 EDT

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China replacing U.S. as top trade partner in Latin America

By Tyler Bridges | McClatchy Newspapers

RIO DE JANEIRO, Brazil — All but invisible in Latin America a decade ago, China now is building cars in Uruguay, donating a soccer stadium to Costa Rica and lending $10 billion to Brazil's biggest oil company.

It's supplanted the United States to become the biggest trading partner with Brazil, South America's biggest economy.

China has moved aggressively to fill a vacuum left by the United States in recent years, as the U.S. focused on wars in Afghanistan and Iraq and the global economic crisis sapped its economy.

"China is rising while the U.S. is declining in Latin America," Riordan Roett, a professor of international relations at Johns Hopkins University, said by telephone while visiting Sao Paulo. "China is all over this region.

They are following a state-driven policy to expand their peaceful presence."

China is beefing up its embassies throughout Latin America, opening Confucian centers to expand Chinese culture, sending high-level trade delegations throughout the region and opening the door for ordinary Chinese to visit Machu Picchu, Rio and other tourism hot spots.

Aiping Yuan came to Rio de Janeiro from Beijing in 1997 on a lark, fell in love with the city and decided to stay. She studied Portuguese, and when Brazilian President Luiz Inacio Lula da Silva made his first visit to China in 2004, she opened a small school in Rio to teach Mandarin.

She began with six students and today has 300, including senior executives at Petrobras, the country's biggest oil company, and Vale do Rio Doce, the biggest mineral producer. Both have growing business with China.

"Chinese is the language of the future for Brazil," Yuan said with a big smile.

China has forged a strategic alliance with Brazil that's allowed the two countries to partner with India and Russia in the so-called BRIC grouping, which is demanding a greater voice in global political and economic affairs. Indeed, China is making inroads with developing countries worldwide.

Beijing's main interest in Latin America has been guaranteeing access to the region's raw materials — principally oil, iron ore, soybeans and copper — to fuel its continued rapid growth. For many countries, there's a downside in the China trade, through which cheap imports have displaced local textiles.

China's growing role has alarmed policymakers in Washington. However, China has been careful not to establish a military presence in the region, since doing so would antagonize Washington. The U.S. has considered Latin America to be in its sphere of influence since the Monroe Doctrine of 1823.

China "treats (Hugo) Chavez as they do (Alvaro) Uribe and Lula," said Alexandre Barbosa, a consultant to the Sao Paulo-based consulting firm Prospectiva, referring to the presidents of Venezuela, Colombia and Brazil, respectively. "They're interested in business."

And what a voracious interest in business they've shown. Trade between Latin America and China rocketed from $10 billion in 2000 to $140 billion in 2008. China is buying zinc from Peru, copper from Chile and iron ore from Brazil. It's shipping electronic equipment to Brazil, buses to Cuba, clothes to Mexico and cars to Peru.

Peruvian President Alan Garcia is trying to position his country as a major commercial hub for China in South America. He's hoping to capitalize not only on Peru's ports in the center of South America but also on a shared history: Thousands of Chinese emigrated to Peru in the 19th and early 20th centuries to do manual labor. These immigrants have left a legacy of the so-called "chifa" restaurants, which offer Chinese food throughout Peru.

Today, China's biggest appetite is for Peru's plentiful minerals.

Two Chinese companies are moving forward with major mining projects in Peru while companies from other countries are suspending or canceling theirs, said John Youle, the executive president of ConsultAndes, a Lima-based firm.

China generally has been investing little money in Latin America, however. This has prompted criticism that it's simply tapping into the region's vast raw minerals, just as colonial powers did for centuries.

Although China has become a major player over the past decade, trade between the United States and Latin America still dwarfs China's trade with Latin America.

Beyond trade, China suddenly is rivaling the World Bank and the Inter-American Development Bank as a major lender to Latin America, at a time when China is flush with cash and many companies can't get access to bank loans.

Petrobras is borrowing $10 billion from China, to be paid off by shipping 150,000 barrels of crude per day to China this year and 200,000 barrels per day for the next nine years, said Erico Monte, a Petrobras spokesman.

Ecuador is borrowing $1 billion from China to finance investments by its state oil company and another $1.7 billion to build what would be the country's largest hydropower dam.

Venezuela is buying high-tech oil-drilling platforms from China and is sending some 380,000 barrels of oil there per day as Chavez diversifies Venezuelan exports away from the United States, his chief nemesis.

"But China has shown little enthusiasm in becoming entangled in Chavez's larger goal of counterbalancing U.S. influence in the hemisphere," Dan Erikson, a Latin American expert at the Inter-American Dialogue, a nonpartisan research center on Western Hemisphere affairs, wrote recently.

Erikson said China was especially attractive to Latin American leaders because of its no-questions-asked foreign policy.

"The United States talks about the need for a battle against corruption, the need for transparency and improved human rights," Erikson told McClatchy. "China is less ideological in its approach to Latin America than the U.S. is."

Still, China uses its aid as a strategic tool to get countries to shift their diplomatic ties from Taiwan to the communist nation.

After Costa Rica became the first Central American country to establish ties with China, the communist country bought $300 million in Costa Rican bonds. More important to average Costa Ricans, China is spending $74 million to build a new national soccer stadium in San Jose. It's scheduled to open in 2011.

Not everyone in Latin America welcomes China's growing presence.
Chinese companies are taking business away from Mexican firms that exported clothes to the United States.

Peruvians have tried to block the expansion of a Chinese mining project near the border with Ecuador that they say would pollute local rivers.
China has angered Brazilian companies by taking their place as the biggest exporter of clothing and textiles to Argentina.

Whether it's seen as a friendly uncle or a ruthless competitor, China's continued expansion in Latin America seems inevitable.

EBX is expanding its port in Rio de Janeiro state to handle Brazil's iron ore exports to China and has signed an agreement with China's Wuhan Iron and Steel to build a mammoth steel plant next to the port.

In May, Lula made his third trip to China, spotlighting the fact that China has become Brazil's biggest trade partner.

The development surprised Rodrigo Maciel, the executive secretary of the Brazil-China Business Council, based in Rio.

"We weren't expecting China to pass the U.S. as China's biggest trading partner until 2011 or 2012," Maciel said.

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McClatchy Newspapers 2009

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G5, G8, Egypt agree to elude currency devaluations


2009-07-09 18:49:10

L’AQUILA : In a significant development on Thursday leaders from G8 and G5 plus Egypt agreed to refrain from competitive currency devaluations and promote a stable international financial system.

In a draft declaration issued here, G8 leaders plus Brazil, India, China, Mexico, South Africa and Egypt agreed to avoid devaluing their currencies to promote their exports at the expense of others.

Leaders also pledged to conclude the Doha round of world trade talks successfully in 2010 and instructed their trade ministers to meet before the next Group of 20 industrial and developing nations in Pittsburgh in September.

With officials from Brazil, India, China and Russia pushing consideration of alternatives to the dollar as the world’s dominant reserve currency, the draft called for a “stable” monetary system, according to a German official who read the language to reporters today.

India’s Foreign Secretary Shivshankar Menon said Wednesday Brazil wants the biggest developing nations to use their own currencies in settling trade accounts.

BRIC nations of Brazil, China, India, Mexico and South Africa discussed “looking at the use of alternate currencies, not so much as reserve currencies,” Menon said.

“But Brazilian President Lula suggested that we should consider using our own currencies to settle our own trading accounts with each other.” Menon said “everyone recognizes” that the idea of a new reserve currency “is a long-term goal.”

Leaders of the G-5 are meeting counterparts today from the G-8, which comprises the U.S., U.K., France, Germany, Italy, Japan, Russia and Canada in the second day of the summit that ends Friday.

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Mexico begins new, lighter visa regime targeting BRIC nations

2009-07-03 12:14:12


MEXICO CITY, July 2 (Xinhua) -- Mexico will begin a new visa regime with lighter paperwork obligations on Monday, hoping to boost trade and tourism from Brazil, Russia, India, China, an Interior Ministry official said Thursday.

"The government... aims to simplify the authorization of visa and reduce delivery times so that the international competitiveness of Mexico will be strengthened versus other tourism destinations and investment markets," Alejandro Poire said.

From July, Mexico will receive visa applications by travel agencies on behalf of tourists, publish a list of nationals needing visas on all government websites, and commit to answering all visa applications within 48 hours.

In February, the Mexican government created a new visa class, the Long Duration Consular Visa, which lasts 10 years and allows visitors to come and go multiple times. Mexico is also planning a campaign to encourage Chinese tourism this year.

It also created the transit visa, specifically trying to encourage Brazilians to change planes in Mexico when making journeys to Asia, created electronic systems for Russians to apply for visas and plans to create third party visa applications in India, to spare travelers a trip to New Dehli.

Brazil, Russia, India and China are collectively known as BRIC nations.