Leading emerging countries, such as Brazil, Russia, India, China and South Africa, will use today’s G20 summit meeting to strengthen their call for a new model of global governance.
The countries, known by their acronym of BRICS, are growing increasingly angry at the lack of implementation of the reform of the governance of the International Monetary Fund that was agreed two years ago.
“We are bit frustrated with the [lack of] progress that has been made,” said a senior Brazilian official who nonetheless hoped that “a great majority” of countries would ratify the agreement by the IMF’s annual meeting in Tokyo next October.
Moreover, the BRICS are due to prepare the ground and make further progress towards the establishment up of a new development bank at a meeting being held later today.
A BRICS bank could fill the gap left by the embattled World Bank, according to Brazilian officials. Brazil’s warning came as the IMF last week revealed that only 107 members having 66.84% of fund quotas had consented to their proposed quota increases.
IMF managing director Christine Lagarde said: “Member countries [must] complete the necessary legislative steps and other legal measures quickly to implement these important reforms within the agreed timeframe.”
G20 leaders are expected to use their communiqué to “fully implement” the agreed reforms.
But in the meantime, big emerging economies such as Brazil will have to deal with the impact of the European crisis – and it may indeed be a rougher ride than anticipated. They will come to Los Cabos with the weakest growth outlook for a number of years.
Last week the World Bank said Chinese growth would slow to 8.2% in 2012 from 9.2% last year, India would decline to 6.6% from 6.9% while Russia would fall back to 3.8% from 4.3%. Brazil was the exception, accelerating to 2.9% from 2.7%.
Signs of a more pronounced global slowdown have prompted some of the BRICS to prepare domestic stimulus measures. China has cut interest rates, brought forward spending on infrastructure and unveiled plans to boost consumer spending.
Brian Coulton, emerging markets economist Legal & General Investment Management, said: “Their view of what is a sustainable growth rate has shifted. They are managing growth down.”
But if the European crisis gets out of hand, Brazilian officials said it may resort to the same kind of arsenal it deployed during the global financial crisis in 2008.
Foreign international reserves worth more than $350 billion represent its main defence against an international crisis, officials said, and the government may use part of those to provide additional liquidity to irrigate the economy and soften the external blow, if needed.