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Vladimir Putin, Narendra Modi, Dilma Rousseff, Xi Jinping and Jacob Zuma (Foto: Nacho Doce/REUTERS)
Image: Reuters

Grande finale

Frank Sieren / re
July 19, 2014

Billions of people followed the football World Cup - but it was in the week after the tournament that history was made, says DW columnist Frank Sieren.

https://p.dw.com/p/1CfQP

In Fortaleza one major global event follows hard on the heels of another. In recent weeks the city in northern Brazil was one of the venues of the football World Cup. Most of the fans had left, though, by the beginning of this week, to be replaced by top-level politicians from all around the world. From the new world, that is. Over the past few days the heads of state of Brazil, Russia, India, China and South Africa (together: BRICS) held a summit meeting in the Brazilian port.

Historic summit in Fortaleza

Even if not nearly as many people were excited by the meeting as were by the World Cup: The summit of Fortaleza will go down in history. The emerging economic powers have made it clearer than ever that they want to cooperate, and that they are no longer prepared to accept the rules laid down by western institutions.

The most important decision of the meeting: At last the participating countries have resolved all their sticking points, and have launched the long-planned BRICS Bank as counterpart to the World Bank. The new bank will be based in Shanghai. Its first president will be an Indian, after which the chairmanship will rotate every five years.

Each of the five founding states will contribute ten billion dollars as initial starting capital. The investment is supposed to increase in value, from 50 billion US dollars to 100 billion dollars. The money is to be used to finance projects in the BRICS countries, as well as in other developing countries and regions.

An additional 100 billion dollars will be provided for a new BRICS monetary fund, of which China will provide the largest part with 41 billion dollars. Brazil, Russia and India will grant pay in 18 billion dollars each; South Africa five billion. The new BRICS fund is an unmistakable reflection of the International Monetary Fund (IMF), another institution that is well-known from the "Old World."

Frank Sieren
DW columnist Frank SierenImage: Frank Sieren

BRICS states at the same level

It's obvious where the founding enthusiasm of the BRICS states comes from. Both the World Bank and the IMF have long failed to deal with partners from the emerging markets on the same level. They've always been stingy with credit, and if this was granted it was attached to conditions that corresponded to the values of the US and the West, but had nothing in common with the wishes of the emerging countries. The demand for new trade organizations has its origins in the anger over the unreasonableness of the West.

And this is why the emerging markets have simply founded their own networks that leave the West out in the cold. The BRICS Bank and the BRICS Monetary Fund are just two foundations among many others. New free trade agreements are constantly emerging across continents. An economic summit comparable to the World Economic Forum in Davos was established last year. And given the way the emerging markets are pushed around by the World Trade Organization again and again, it's just a question of time before the initiation of an alternative to the WTO.

BRICS is not free of tensions

However, it is clearly not a foregone conclusion that the new world economic clubs will actually function. After all, there are increasing tensions between the new superpowers, as well. Beijing in particular now has a big problem within this new alliance. The reason is that things don't look that good economically for three of its new partners, the exception being Brazil, where the economy has been stimulated by the World Cup, and by the forthcoming Olympic Games in two years' time. And after these global events, Brazil will initially experience an economic depression.

South Africa has already been going through a long period of economic weakness over the past few years. Russia's economy is too heavily based on natural resources, and is therefore weakly positioned.: It is also now troubled by the conflict in Ukraine. India has the same problems as Brazil: Its infrastructure is poor, and urgently-needed political reforms have been postponed for years. The new Prime Minister Narendra Modi has first to prove that he can get a grip on these problems.

Against this backdrop, China comes out top of the class, and is drawing envious glances from the other emerging markets. What to do? Beijing has only one option: It has to behave as modestly as possible around the others. If it doesn't, there is a risk that the others will not see it as a partner, but as a danger, like the West.

China - the leader of BRICS

In any case, though, China has an ace up its sleeve. It is not only the biggest partner in the BRICS alliance: it is also the one with the best international connections. Back home in Asia there is some friction with its neighbors because of China's strength, but economically they are entirely loyal. In Africa, China has even closer alliances than top dog South Africa. And in Latin America it has also better economic relations to many states than Brazil.

After the Fortaleza summit, the Chinese president Xi Jinping will travel to Argentina, Venezuela and Cuba. His foreign minister Wang Yi was his warm-up act there three months ago. That too, then, will also be a visit to friends. If China succeeds in using its network to convince other countries to ally themselves with BRICS and help the idea to flourish, its weaker partners will view Beijing not with envy but with gratitude.

Our correspondent Frank Sieren is considered a leading German expert on China. He has lived in Beijing for the past 20 years.

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