By Jaylan Boyle, Contributing Reporter
RIO DE JANEIRO – For the first time, Brazil has become a creditor rather than a debtor to the IMF (International Monetary Fund), pledging US$10 Billion to be spent on IMF bonds.
“This is an historic moment for us,” said Guido Mantega, Brazilian Minister of Finance, at last week’s annual IMF and World Bank Conference. “It is the first time in history that Brazil is lending resources to the IMF and therefore to the international community.”
In its pledge to the IMF’s coffers, Brazil joined fellow BRIC countries China and India, completing a contribution that forms one-sixth of the US$500 Billion in bonds purchased by the G20, a new panel comprising the world’s twenty richest nations. The G20 replaces the old G8. As the financial crisis began to bite, and with the emerging BRIC economies (Brazil, Russia, India, and China) clamoring for greater representation at the table of world financial policy control, the old G8 was deemed increasingly irrelevant.
Brazil has been among the most strident voices demanding that the developing nations be given more of a say. The IMF recently agreed to increase the voting share of BRIC nations to five percent, a concession that Finance Minister Mantega described as inadequate. The BRIC nations have agreed to insist on their original request for a seven percent share.
Many countries around the world, in the wake of the recent global financial crisis, have been calling for the IMF to be granted powers and funding to address global financial imbalances, rather than being a body designed to assist the poorer nations with infrastructure loans. This is just one of the measures that have been tabled during the crisis, aimed at streamlining the coordination of global economic policy.
One of the matters at stake is the fact that many nations, Brazil and China among them, must maintain large currency reserves, usually in US Dollars. This can mean that if such a currency becomes devalued, those countries are left holding billions in severely depreciated capital. Many countries believe this to be an imbalance that the IMF could help to redress if it were given the capabilities of a kind of world central bank, or emergency lender, able to make loans in times of need.
China has been especially vocal in decrying the necessity of holding large amounts of US dollars, calling for countries to begin stocking a range of denominations.
According to a recent report by Robert Fisk of the UK’s Independent newspaper, many Arab states have been in secret negotiations, along with Russia, China, Japan, and France, to end the dominance of the US dollar in oil negotiations, opting instead for greater diversity. The Independent report was directly attributed to the US Dollar losing 0.7 percent in value the day after publication.
Iran also anounced last month that henceforth its currency reserves would be held in Euros rather than US Dollars. These global developments, called by many commentators an historic shift in the global paradigm, have prompted speculation that real evidence is at hand pointing to the beginning of the end of American economic hegemony.