Building the myth of under-development, BRIC by BRIC

Would you own a checking account in a bank run by these people?

Would you keep a checking account in a bank run by these people?

So the BRICS countries are meeting in Brazil right now, and their influential leaders have invited hilarious sideshows such as Nicolás Maduro to tag along. The big thing coming out of the meeting? A new BRICS development bank.

Hmm, a development bank for emerging economies. Now where have I heard that idea before?

You might be surprised to know that China already has a development bank of its own. So does Brazil. So does Russia. And so does South Africa. India, strangely enough, had one … but switched it over to being a commercial company a few years ago.

So, if all these countries already have development banks, why set up a new one? Simple. Headlines!

Sure, you might argue that together, these banks are stronger than separate. You might also contend that pooling their resources allows these countries to lower their risk. And perhaps there are enough economies of scale in banking to warrant bringing these countries together in a new institution.

As I write all that, I realize I’m grasping at straws. There is no rational reason for a BRICS bank … It might come about, but I have serious doubts of any lasting impact coming from such a thing. Whatever the BRICS bank can do, individual banks in these countries could also do. In fact, a BRICS bank might even be a bad idea, given how a bank headquartered in Shanghai will have little oversight as to how its money is spent in Boa Vista.

Which brings us back to wonder whatever happened to the Banco del Sur.

In 2007, Hugo Chávez convinced some of his South American pals to create the Bank of the South. Impressive headlines followed, and Nobel Prize winners chimed in saying it was a swell idea. Seven years later, and the Bank of the South is still an institution in paper only, apparently due to a lack of interest on the part of the Brazilians, the same ones that are “pushing” this new bank on newspapers the world over. Why, the Banco del Sur doesn’t even have its own website!

No worries though, I’m sure that in a few years and a few more summits, these details will be hammered out. I mean, it sounds really nice when you say the new bank will have “$7 billion in capital” or “countries have pledged $50 billion” … but the proof is in the pudding (or the feijoada, in this case). In the meantime, announcing a new development bank is nothing more than a swell time for unserious leaders such as Evo Morales to recycle their old speeches about how the financial institutions of the North are keeping his people poor.

A famous visionary once said “as we go from summit to summit, our people go from abyss to abyss.” Oh, how right he was.

21 thoughts on “Building the myth of under-development, BRIC by BRIC

  1. Juan, the Brazilians were more eager than the rest of this combo to flood newspapers with a “Brics create a 100billion$ development bank” headline, after their football squad opprobrium against Germany last week. Remember Remember the 5th of October, where Brazilians (hopefully) will punish Dilma and the PT at the ballot box. What’s left out is whether or not this newly created institution will aid other pals such as Venezuela when a balance of payment crisis hits its doorstep.

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  2. “En este sentido, Maduro propuso una alianza de trabajo entre el Banco del Sur y el naciente Banco de Desarrollo del Brics, creado este martes en la ciudad brasileña de Fortaleza.”

    ¿No te digo yo que lo llevan para que eche chistes?

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  3. Banco Brics has money, Banco del Sur has no money. Maduro will not get more than $100,000 loan from Banco de BRICS. He does not quite get it. But he gets lil.

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  4. I try to be the Devil’s advocate…or the Mandarin’s advocate in this case.
    China has a long history and it sees things really long term. They know what it is to become exploited by foreign powers. They are learning to exploit countries with governments that have Maduriste views of the world, even if without the ideological patina: Zimbabwe, Myanmar, Eritrea.

    Could it be worth it for them to give away to Maduro a couple of billion dollars?

    Like imagine they buy huge swathes of land in Barinas, Guárico, Monagas, to make them productive for exporting soja beans to China? Imagine they get possession of all our gold mines?
    They actually start working with Chinese personnel in more oil fields?

    I reckon it’s less likely because somehow Venezuelans are not Zimbabweans…I still wonder how much money Maduro can get out of China out of such deals.

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  5. BRIC nations are trying something very difficult , they want to create a block , which main virtue ( if it can be called that) is that they stand (at least in apperance) proudly aloof from the countries that exemplify the values of the West ,becoming the proponents of an alternate geopolitical cultural identify. Thats hard to do because despite their show of being ‘not the traditional capitalist west’ , there are bigger divisions between them than with the West which economic and political influence they try to coopt . India , South Africa and Brazil for example are linked in their root political culture to the West , they are democracies and for the most part market economies with strong ties to the Wests market economies .

    China and Russia are big and economically important , but their political systems are not exportable to the rest of the world , from the point of view of their political values they are on the wrong side of history and not likely to attract many inmitators , China is a wonder machine of economic productivity , Russian a much weaker bur resource rich country . China stands out for something which has little resonance in other peoples sympathies , that doesnt register in their sensibilities as something admirable , and that is for a political system which combines a tough no holds barred despotism with a partially succesful attempt at embracing the virtues of pragmatic technocracy and the values of market driven economic growth . One might call it the Mandarin system, something which has roots in their historical past but which doesnt exist anywhere else in the world.

    The only deep pockets among the bunch are those of China so they will be calling the shots . It will become a vehicle for Chinese ambitions of world prominence . The other countries are just side kicks wanting to appear more independent in their political influence than they really are . Dont know that they may throw some crumbs to Venezuelas regime as a gesture that they mean business , but nothing that is likely to be very large or very lasting . They known the weaknesses of the regime too well , and my feeling is that they scorn it for being so stupid even if they are not likely to express it to the outside world. . .

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  6. Every thing is incredible in this post, the world is changing from a geopolitical and geo-economic point of view wherever you like it or not , capitalism and western culture are losing ground culturally , ideologically…. and economically ,but Venezuelans from opposition are still living in the past : “we were happy and we did not know it” , that’s the philosophy and culture that drive the opposition in Venezuela….

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    • Capitalism losing ground? Right. Have you ever heard of a country called China? It’s the most capitalist country on Earth. Vietnam is also capitalist. Russia is feudal-capitalist.

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      • I will recommend you to read the book by Arrighi Adam Smith in Peking , so you can establish a difference between capitalism and market economy …..

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        • After a five day run-and-gun to Macau and Guangzhou for a client, I’m pretty positive I saw rampant capitalism at most levels of enterprises while I was there. China may call it a socialist market economy, but it is really capitalism with a strongly statist flavor. Most of the market analysts I know that cover EA refer to it as state capitalism.

          If I recall correctly, Arrighi explicitly argues in Adam Smith in Beijing that China will be the next global center of capitalism.

          Ironic that you’d use Peking, given that that is the English pronunciation of Beijing, and hails back, in many Chinese minds, to the old days of Western manipulation, exploitation and dominance of China. Want to screw up your negotiations with the government? Use Peking and not Beijing.

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        • Oh, please! That’s so preposterous!
          I didn’t know the bloke, to be honest. I saw the huge He is a bloody sociologist and, according to Wikipedia, his influences are Marx, Gramsci and Baran, a bunch of commies! (the others I didn’t know either)

          I advise you to read “The Fall and Rise of a Great Power”, by J. Fenby, but, above all, to actually go to China, travel around and before that to actually have good Chinese friends from different areas and backgrounds and listen, listen and listen to them attentively and critically. It doesn’t hurt if you speak at least some Chinese to grasp their voices.

          That would be much better for you than relying on a Marxist fool. I read the huge praises to that book on Amazon. They sound all the same and it seems it’s the same little club of pseudo-scholars who read each others’ work and nothing else.

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    • “we were happy and we did not know it”

      Yes, they thought the murder rate was bad enough back then, and corruption was pervasive enough. They had no idea how bad it could get.

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    • GDC says that Western culture is losing ground. So, let’s each of think of the last ten movies we have seen, the last ten songs we have listened to, the last ten books we have read…how many were Chinese or Russian? Brazilian? Other BRIC such as India?

      Now, count to yourselves how many of those songs, films, books, etc were produced in the US or Western Europe. Does anyone have a total in any category which could be called non-Western?

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  7. Capitalism is constantly mutating into new forms , it is incrediblyt adaptable , it flows in the veins of any political system even those that purport to oppose it . It has become unstoppable !! Those who try to defy it end up ruined , like Venezuela , even with its rapidly depleting oil wealth , Venezuela is an example to the world , abandon capitalist at your own peril !!.

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    • “Venezuela is an example to the world , abandon capitalist at your own peril !!.”

      It should be… but the world won’t believe it until starving refugees start pouring over the borders.

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  8. After every Summit, you have to announce something that sounds like progress. You can’t just say, “We came, we saw, we talked.”, and leave it at that. But the fact is that if THAT is what they are announcing, it means that there Summit produced nothing of any substance. And why would it? What is it that the BRICS economies really have in common and what do they really need from each other?

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