Brazil is bringing an urgent message to next week’s meetings of the International Monetary Fund: Western-backed lenders must give developing nations more say if they want to remain relevant.
(Bloomberg) — Brazil is bringing an urgent message to next week’s meetings of the International Monetary Fund: Western-backed lenders must give developing nations more say if they want to remain relevant.
A major redistribution of IMF quotas to correct the underrepresentation of large emerging-market economies has been a decades-old demand from Brazil and other key developing countries, but the price of inaction is growing higher, according to Tatiana Rosito, international affairs secretary at the Brazilian Finance Ministry.
“The developing world has not stayed still while reforms stall,” she told Bloomberg News in an interview. “The creation of the New Development Bank by the BRICS and the Asian Infrastructure Investment Bank show that emerging countries are looking for ways to finance their own development.”
President Luiz Inacio Lula da Silva will use the power of his Group of 20 presidency to make a stronger push for reforming the IMF and the World Bank, just as he called for changes at the United Nation’s Security Council last month. It will be up for Finance Minister Fernando Haddad to take his message to the multilateral lenders in Marrakesh next week.
IMF Managing Director Kristalina Georgieva said in an interview with the Financial Times that the Washington-based lender needs to change to reflect how the world economy is changing. She warned of possible devastation if the institution is unable to bring confidence to other countries.
Currently, the US holds the largest share of IMF quotas, about 17%. China, the world’s second-largest economy, has only 6%. Brazil has little more than 2%.
It’s unlikely there will be any change in voting shares during the fund’s current quota review period, which ends in December. The US opposes shifting voting weight to countries unless they are “respecting the roles and norms of the IMF and working to strengthen the international monetary system,” Jay Shambaugh, the US Treasury’s undersecretary for international affairs, said last month, in an apparent reference to China.
“Brazil’s position is that an increase in quotas must be accompanied by a realignment in favor of emerging countries, to correct their underrepresentation,” Rosito said. “We also agree with the US that it is important to increase quotas to replace existing bilateral arrangements.”
Lula, she added, wants to strengthen multilateral development banks to finance environmental projects as well as those that fight economic and social inequality. That includes allowing those institutions to increase their lending capacity through leveraging their current capital, which would also require the backing of ratings firms.
Lula repeatedly called for changes to global governance at global forums such as the G-20 summit in New Delhi and UN General Assembly in New York. At the same time, he has acknowledged how those changes have been difficult.
“We have tried to propose changes to the IMF since our first meeting, but changes have been extremely small and do not advance,” he told reporters in India, upon assuming the G-20 presidency.
–With assistance from Eric Martin.
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