Emerging countries should focus on their domestic markets and especially in infrastructure investments in order to address the delay in the recovery of the world economy and the downturn in international markets, defended the Minister of Finance, Guido Mantega, after a meeting of Ministers of Finance and presidents of Central Banks of Brics, the group formed by Brazil, Russia, India, China and South Africa. The ministers of the five countries agree on the priority for infrastructure, said Mantega, who announced that Brazil has interest to welcome Chinese investments in the industry.
“We have a similar view that the international economy has not progressed much, we are still trying to end this crisis that began in 2008, but that is prolonging in the advanced countries,” said Mantega. We, emerging countries, especially the Bric countries, we have to organize to counter these issues that emerge from this delay,” he suggested. “We will be the ones that will continue with the growth of the world economy, we will be the ones that will have to stimulate trade and domestic demand for our countries,” he said.
Stimulating domestic demand is “not worth” anymore for Brazil, which has the “increased” demand, he cautioned. “A consensus among all of us is that stimuli have to walk by the side of infrastructure investment,” he argued.
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“It is an even greater need for us in Brazil, since we are behind this, because we have demand for it, but also India emphasized that need a lot,” he reported. Today, the presidents of the development banks of the five countries sign agreement to co-finance infrastructure and sustainable development projects in African countries. But so far, however, the only coordination instrument of investments in the Bric countries is a project to create the Brics Bank, a development finance institution with resources of at least $50 billion, which will have negotiations for its constitution launched today by the presidents of the block.
Negotiations are facing resistance from Russia, but Mantega believes it is possible to sign the bank constitution agreement until 2014, which would, after approval by the legislatures of the five countries, the beginning of financial transactions by 2016.
“The Brics development bank is a necessity,” said the Minister. “There are already other multilateral banks, but they did not realize the needs that lie ahead,” he said, noting that the country plans to invest $250 billion that could have the participation of the other countries. India has investment plans totaling $1 trillion, he recalled. “It shows the size of the issue, the resources we need.”
According to Mantega, the advantage of the Brics Bank will be its governance structure, created and maintained by the five countries without outside interference. It is exactly this structure, however, one of the points that are still undefined for the new institution. Brazil suggests that the capital is divided equally by the five partners in an operation such as the Andean Development Corporation, project finance institution in the Andean region with maximum rating from the rating agencies.
Despite the restrictions on the government itself regarding the model used by construction companies in China, which do not usually hire labor nor use equipment purchased locally, the minister defended the association with Chinese funds for investment in infrastructure in Brazil. “Today, China is the largest trading partner Brazil has, and we can expand this partnership into other areas such as infrastructure, in which we will devote efforts and increase investments,” said Mantega.
“We will be open for Chinese to also participate in infrastructure and energy enterprises, as well as in oil and gas,” he exemplified. “There are several industries where synergy and complementarity can be found.”
Today, President Dilma Rousseff meets with the newly elected President of China, Xi Jinping, to meet the new Chinese leadership and discuss plans for trade and investment. Yesterday, as Valor anticipated, the Central Banks of Brazil and China signed an agreement to swap reserves, in which in case of lack of international liquidity or problems in the balance of payments in one of the countries, one government may withdraw from the reserves of the other the equivalent of about $30 billion (R$ 60 billion or 190 billion yuan).
The swap agreement, according to Mantega, is intended to provide “financial backing” in case of worsening of the crisis, and has a term of three years, renewable at the discretion of the two governments.
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