Committee for the Abolition of Illegitimate Debt

GOA, INDIA - A Brazilian leader’s faux pas spoke volumes about the Brazil-Russia-India-China-South Africa (BRICS) heads of state summit in Goa, at a well-protected beach resort this weekend. In Brasilia last month, foreign minister (and occasional presidential candidate) José Serra told an interviewer that the BRICS included Argentina. And as he stumbled while spelling out the acronym, Serra also had to be prompted to recall that South Africa is a member (because in English it is the “S” in BRICS, but in Portuguese the country is “Africa do Sul”).

Well-known journalist Luis Nassif disgustedly concluded that the politician – who has a doctorate in economics from Cornell University and was implicated in various corruption scandals, including favours western oil companies against Brazil’s own Petrobras – is “neurologically damaged.”

With men like Serra and his president Michel Temer (also corrupt and widely despised) at the helm, so too is the BRICS bloc damaged goods. Former Goldman Sachs investment strategist Jim O’Neill recently offered faint praise, that “some of the BRICS are kind of doing basically what I thought they would do” though he conceded that Brazil, Russia and South Africa suffer the “commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. curse.”

BRICS as a project is now being written off, unfairly I think (given its sub-imperial accomplishments), because of divergent economic interests and zany geopolitical circumstances.

The latter inconsistencies start with anti-Washington regimes in Beijing (with sabre rattling over a few rocks in the South China Sea) and Moscow (whose sabres are sticking out of victims in eastern Ukraine and Syria, not to mention allegations of Russian-hacked emails repeatedly wounding Hillary Clinton). These defensive gestures are justified given the prolific record of malevolent destruction meted out by Washington, especially since the Bush-Obama regime began in 2001.

Yet not only does BRICS also contain Temer’s right-wing coup ‘government’ in Brasilia with its strong pro-imperial bias, but also the far-right Hindi nationalist government in New Delhi. As Brazilian commentator Pepe Escobar recently explained to Russia Today, “The cozying up to the Pentagon happens just a few months after Prime Minister Narendra Modi – who had been denied a US visa for nearly a decade – addressed a joint meeting of Congress in a blaze of glory, declaring that India and the US are natural allies.”

Meanwhile in between, Pretoria politicians, as usual, are talking left while walking right. Indeed after the dust of ideological confusion settles, at least one consistency is observable from all the BRICS elites: a stream of anti-imperialist chatter even when the intent is to assimilate into imperialism.

Last week, for example, African National Congress general secretary Gwede Mantashe pronounced, “South Africa will continue to call for the transformation of the Bretton Woods Institutions and oligopolistic credit ratings industry.”

He is worried because in December, it is widely anticipated that Standard&Poors, Fitch and Moody’s will deliver Pretoria a junk-bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. rating and with it a run on the currency. Indeed the run just restarted following this week’s surreal accusations by the national prosecutor that finance minister Pravin Gordhan committed fraud by helping a friend secure a $75 000 early pension – a gambit seen as a crude excuse for the crony capitalist faction of the ANC to insist Jacob Zuma fire Gordhan, who is mainly backed by neoliberals and big business but also by democrats worried about the slide into a corrupt dictatorship.

Calling for ‘transformation’ of the erratic New York rating agencies Rating agency
Rating agencies Rating agencies, or credit-rating agencies, evaluate creditworthiness. This includes the creditworthiness of corporations, nonprofit organizations and governments, as well as ‘securitized assets’ – which are assets that are bundled together and sold, to investors, as security. Rating agencies assign a letter grade to each bond, which represents an opinion as to the likelihood that the organization will be able to repay both the principal and interest as they become due. Ratings are made on a descending scale: AAA is the highest, then AA, A, BBB, BB, B, etc. A rating of BB or below is considered a ‘junk bond’ because it is likely to default. Many factors go into the assignment of ratings, including the profitability of the organization and its total indebtedness. The three largest credit rating agencies are Moody’s, Standard & Poor’s and Fitch Ratings (FT).

Moody’s : https://www.fitchratings.com/ is absolutely valid, yet the real problem is what lies behind them: international financiers who now have Pretoria under the thumb of foreign debt.

That debt load recently hit a historic record of 44% of GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. , and to repay interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. while permitting massive corporate profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. outflows, will mean yet more borrowing from Western – or BRICS – lenders. South Africa’s energy parastatal Eskom is in the process of negotiating a $5 billion loan from China, for example, so it can argue the case for self-financing a nuclear programme, likely to be acquired from Russia or China. Will a new BRICS credit rating agency be a solution, or will it be just an excuse to put future generations of South Africans deeper into a debt that must be repaid, not with rands (which can be printed) but with hard currency ($ or yuan)?

Hatred of the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and International Monetary Fund IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org (IMF) is also easy to articulate from Brazil. As BRICS New Development Bank (NDB) vice president Paulo Nogueira Batista remarked last week, “The Washington institutions fundamentally reflect the point of view, the interest, the ideology of the North Atlantic powers, the Europeans on one hand the Americans on the other.”

But here the BRICS are at their most self-delusional and self-destructive, for they have had the chance to change the Bretton Woods Institutions in two ways: contesting their leadership and changing their voting power. The past months are revealing on both counts.

First, no doubt that both World Bank President Jim Kim and IMF Managing Director Christine Lagarde need to be replaced. They won’t be, though, because the BRICS failed to put up a fight. In 2011 Lagarde was contested by a Mexican and in 2012 Kim fought a Colombian and Nigerian – but with divergent BRICS’ country backing, so neither stood a chance.

In 2016, both were allowed to retain their posts, even though former French Finance Minister Lagarde is subject to an upcoming corruption trial based on her €400 million largesse to a generous party donor, Adidas founder Bernard Tapie; and even though Kim is described by University of Pennsylvania political scientist Devesh Kapur as “among the worst presidents in World Bank history. His administration has been marked by authoritarianism and capriciousness, and he has forced out senior managers at unprecedented rates, sometimes requiring the Bank to reach quiet settlements with those affected. In four years, the president’s office has had five chiefs-of-staff, and several of the Bank’s senior women have left, hinting at a capricious leadership culture.”

His critics on the left (from where Kim entered politics) are just as forthright, especially when it comes to his support for damaging mega-hydro projects and disastrous roll-back of social and environmental standards.

If ever there was a case for the BRICS making a stand against the imperialist multilateral banking tradition – that a European leads the IMF and a US citizen leads the World Bank – this was the year. But as Kapur remarked, the “World Bank’s recipe for irrelevance” was partly cooked up within the BRICS kitchen because “in the World Bank Group’s official leadership, the first three people listed after the president – hailing from Brazil, China, and India, respectively – are carefully distributed by nationality.”

The same kind of sub-imperialist assimilation was on display when the IMF included the Chinese yuan in its basket of currencies last November and a month later when voting power was rearranged, giving China an increase of 37%, Brazil 23%, India 11%, and Russia 8% – but at the expense of Nigeria (which lost 41%), Libya (39%), Morocco (27%), Gabon (26%), Algeria (26%), Namibia (26%) and even South Africa (21%).

On top of that, last month the World Bank and NDB officials signed a deal for “co-financing of projects; facilitation of knowledge exchange… advisory services; and facilitating secondments and staff exchanges... We greatly appreciate timely support offered by the World Bank Group throughout our establishment process, and look forward to advancing and deepening our co-operation.”

So, will the Bretton Woods Institutions save the BRICS NDB and Contingent Reserve Arrangement from irrelevance – especially since the latter BRICS agency explicitly relies upon the IMF for policing structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ loans?

Tough questions about the bloc’s coherence are being asked; e.g. in South Africa, Megan van Wyngaardt of Creamer Media recently enquired, “With each BRICS country facing challenges, could it disband?” Institute for Global Dialogue researcher Francis Kornegay replied, “BRICS is increasingly taking the form of RICs” due to the Brazilian and South African crises.

In contrast, a group of several hundred activists from India have gathered for two days prior to the summit in a more optimistic mode. The ‘People’s Forum on BRICS’ aims “to connect local voices and concerns of Goa to the global scenario and critically engage with BRICS in this endeavour… to share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. analysis, struggle notes and build solidarity in the struggle for a more just and equitable society.”

Especially in the wake of a massive national strike day last month by more than 150 million Indian workers opposed to Modi’s neoliberalism, such a society appears nowhere on the BRICS’ leaders radar screen, aside from rhetoric.

BRICS leaders are protected from this rabble by Modi’s proto-fascistic police state. And to top off the Taj Exotica 7-star resort’s aesthetics, sand sculptures have been constructed for the leaders’ delight: the Taj Mahal, the Great Wall of China, Russia’s Saint Basil Cathedral, Rio de Janeiro’s Christ the Redeemer statue and, representing South Africa, it is the Afrikaans Language monument near Stellenbosch.

What?! All these memorial structures have dubious origins in patriarchy and the religious oppression of the poor. But it was 40 years ago this year that the final leg of the anti-apartheid struggle kicked off in Soweto, as students poured into the street (much as they are this week against the apartheid-economics of high university tuition fees). Their immediate grievance was being forced to learn Afrikaans.

The language monument contains a telling inscription by Nicolaas Petrus van Wyk Louw – “Afrikaans stands with one leg in Africa and with the other in the west” – that somehow also speaks to the BRICS’ real agenda, sub-imperialism: five countries’ feet joining those of the US and EU, firmly astride the throats of the world’s poorest people.