Mon, Jun 15, 2009 - Page 11 News List

Emerging economic giants to hold summit

RIVAL? Economists say the grouping of Brazil, Russia, India and China is not likely to produce a new currency to counter the dominance of the US dollar anytime soon


Brazil, Russia, India and China flaunt their unity against more established powers this week as the four emerging economic giants hold the first summit of their grouping, known as BRIC.

But while they will express determination to act together during the current economic crisis and beyond, they are years away from being a counterbalance to established global institutions, analysts say.

It is also unclear whether Russian President Dmitry Medvedev, Chinese President Hu Jintao (胡錦濤), Brazilian President Luiz Inacio Lula da Silva and Indian Prime Minister Manmohan Singh will agree to establish a more permanent international entity.

In any case, Russia will enjoy bragging rights as host of the first formal BRIC summit, which is set to take place tomorrow in Yekaterinburg, a city 1,420km east of Moscow in the Ural Mountains.

“Russia believes this format to be rather promising economically as well as politically,” Medvedev’s spokeswoman, Natalia Timakova, told reporters this week.

But she reserved judgment on the broader implications of the summit.

“It is too early to make any predictions,” she said. “We need to see how this first meeting goes.”

Russian Foreign Ministry spokesman Andrei Nesterenko told reporters that the four leaders would adopt a joint declaration calling for the “formation of a more just and democratic world order.”

However, he could not say whether the summit would be the first in a series of regular meetings, saying it would be up to the leaders to decide.

Nesterenko also sought to quell speculation that the gathering was meant as a snub to US President Barack Obama.

“This is not a reproach to anyone,” he said.

Analysts say the BRIC nations are displaying a growing willingness to coordinate their efforts as they seek to counter US global domination and forge a bigger role for themselves.

The BRICs are expected to be major buyers of the very first bonds that the IMF is working to issue, in line with commitments by developed and developing economies to provide US$1.1 trillion to the IMF and other global bodies to help the poor.

Both Russia and China have in recent months come out in favor of revamping global financial structures, saying there was a need for a new supra-national currency to prevent a repeat of the global economic crisis.

Moscow in particular has sharply criticized the US dollar’s role as the dominant global reserve currency.

But analysts are skeptical that the BRICs can create a new reserve currency or act as a tight economic or financial entity any time soon, even as they acknowledge the importance of the group’s first gathering.

Rory MacFarquhar, a Moscow-based economist at Goldman Sachs, the investment bank credited with coining the BRIC acronym, said the significance of the summit would be political rather than economic.

“There’s considerable interest — you could say from all [the BRIC] countries but Russia in particular — in creating an alternative” to established international organizations, he said.

He said that tomorrow’s high-profile meeting would be part of the Kremlin’s “crusading against anything it considers unipolarity.”

Vladimir Osakovsky, head of strategy for UniCredit bank in Moscow, said the idea of a new reserve currency was “a politically motivated ‘news-maker’ rather than the first step towards creating a new tool of global economic policy.”

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