“Rule-maker? Brazil and the New Development Bank”
Among the large BRICS economies (i.e. excluding South Africa) Brazil is a somewhat unique case given its economic structure, which is more heavily dependent on foreign capital inflows (FDI) than the other coalition members. The other large BRICS are largely self-reliant; either because they have been traditionally closed to large FDI inflows (India); have substantial current account surpluses from vast oil and gas reserves (Russia); or capital-intensive development models involving high saving rates and domestic financial repression (China). Brazil has historically relied on foreign capital as part of its economic development strategy even as it has remained a relatively closed economy (Montero 2014). Unsurprisingly, the country has a long tradition of multilateral cooperation and has long been a stakeholder of existing governance structures. In addition, much like the other BRICS, over the past decade Brazil has become a key provider of South-South development cooperation, for instance through investments elsewhere in Latin America and in Africa that receive considerable financing from the Brazilian National Development Bank (BNDES). However, its strong identity as a democratic rising power means that it sometimes promotes principles that are at odds with those espoused by China and Russia, creating interesting dilemmas for its foreign policy.
The launching of the New Development Bank (NDB), previously known as BRICS bank, therefore presents an interesting set of puzzles. Namely, to what extent does the launching of a competitor to existing multilateral structures (the IMF and the World Bank) present a challenge to Brazil’s long diplomatic tradition of acting within established multilateral institutions? Concretely, is such a shift compatible with Brazil’s political economy and with long-held foreign policy perspectives embedded in the Brazilian bureaucracy? The NDB clearly states among its mail goals to act “as an alternative to the existing US-dominated World Bank and International Monetary Fund.”2 In this context, what has been the role played by Brazil in the negotiations and design of the NDB? To what extent are Brazilian priorities and interests reflected in the institutional design and (once these are announced) funding decisions of the bank? Is Brazil becoming a rule-maker by joining the other BRICS-countries in an attempt of reshaping global financial governance; or does it pursue its traditional consensual role in bridging the New Development Bank with existing structures governing the current global economic order? These questions relate to a more fundamental issue that has brought much attention, in particular as a result of the rise of China; namely whether and if so to which extent are emerging economies creating an alternative global order. Ultimately, these questions relate to the feasibility of institutionalising the BRICS as an alternative grouping from the OECD and the G-7, and of the form such institutionalisation may take.
As Abdenur and Folly argue (2015) the NDB marks a substantial (indeed the first significant) leap towards institutionalising the BRICS along three relevant criteria: i) the creation of a coherent bureaucracy, ii) the latter’s social embeddedness in domestic administrations, and iii) the formation of a normative platform. The main objective of the project is to investigate and understand Brazil’s role within the launching of the NDB, in particular as to its institutional design and its funding decisions. In doing so the project will not only contribute to shed some light into the ways the NBD is transforming global financial governance, but also through the joint cooperation of Swiss and Brazilian researchers it aims to provide a better picture of Brazil’s role as a rising power within existing and new governance structures, in particular the BRICS.
Prof. Omar Ramon Serrano
Prof. Adriana Erthal Abdenur