G20 Information Centre
2011 Cannes Summit Performance Assessment:
Ashley Pereira, G20 Research Group
November 7, 2011
Nowhere are the political reverberations of Brazil’s extraordinary rise as an emerging power more pronounced than its increasing impact on the G20. Indeed, an analysis of Brazil’s objectives at the Cannes Summit – and an assessment of its achievements – indicates that it is an important player of the new club that the old club must learn to accommodate.
Uma avaliação sobre o resultado da reunião de cúpula do G20 sugere que, em meio a sensação de fracasso, o Brasil – junto aos grandes países emergentes – consigiu um sucesso relativo no G20.
The Eurozone debt crisis will feature prominently at the G20 Summit. Its impact on the wider global economy indicates that it will be a priority for all member states – European and non-European alike. Brazil is no exception. It is unclear, however, what role non-European countries will play. One option that appears to be gaining currency is a financial contribution from non-Eurozone countries, including Brazil, to ailing European economies through the European Financial Stability Facility (EFSF) or through the International Monetary Fund (IMF). For its part, Brazil has indicated its strong preference for the latter.
Rationale: On 3 November 2011, the leaders of the BRICS countries convened ahead of the G20 Summit – on Brazil’s initiative – to coordinate the bloc’s response to the unfolding fiscal crisis in Europe. Brazil announced that it would consider pledging a fraction of its $350 billion in foreign reserves to the European Union through the IMF. On 4 November 2011, Brazil reiterated its position during a press conference. However, at the close of the Summit, President Dilma Rousseff failed to indicate whether the country would contribute funding – and, if so, how much – to boost the IMF’s resources.
Still, while the BRICS countries did not make any firm commitments to resolve the Eurozone debt crisis, they converged around a common position – with the exception of China: Brazil announced that it would not purchase European bonds. Instead, it proposed to contribute through an IMF-administered fund. Russia and India, too, indicated their preference for pledging rescue funds through an IMF-sponsored package over a bilateral deal. On the contrary, China signaled its willingness to contribute up to $100 billion (73 billion euros) under two conditions: First, certainty that the EFSF bailout package will work; and second, information of the kind of guarantees that will be offered if the plan fails.
Therefore, Brazil’s early efforts to coordinate the BRICS countries’ positions partially fulfilled its objectives.
Finally, under the auspices of the Cannes Action Plan for Growth and Jobs, member countries committed to take all necessary measures to ensure the stability of the Eurozone. Additionally, in response to the situation in Greece, member states adopted a rigorous adjustment program and a voluntary nominal discount on Greek debt held by private investors.
Brazil and other emerging markets are determined to curb the appreciation of their currencies. In July 2011, Finance Minister Guido Mantega – expressing concern that exchange rate misalignments persist – warned that the global currency war is not over. Therefore, President Rousseff is expected to raise this issue at the G20 Summit.
Outcome: Reform of the International Monetary System was firmly on the French Presidency’s agenda. In fact, it has – for long – been a pet project of French President Nicolas Sarkozy.
In the Final Declaration, member countries pledged to build a more stable and resilient International Monetary System. Moreover, recognizing that exchange rate volatility undermines growth and financial stability, they committed to move toward market-determined exchange rate systems, and to enhance exchange rate flexibility to reflect underlying economic fundamentals, avoid persistent exchange rate misalignments, and refrain from competitive devaluation of currencies. These pledges, which were also articulated in the Cannes Action Plan for Growth and Jobs, are consistent with Brazil’s monetary interests.
Price volatility increases uncertainty and income volatility for producers. Brazil, which accounts for 19% of the world’s arable land, is a major agricultural powerhouse: It is the largest producer of coffee, oranges, sugar, and poultry, and is among the top three producers of tobacco, corn, and beef. It is also home to 33% of the world’s rainforest, one-fifth of its fresh water, and nearly one-third of its biodiversity.
On 8 April 2011, Brazil and the UK jointly urged the G20 to tackle food price volatility, rising food price inflation, and long-term food security challenges. In a joint declaration, Brazil’s Agriculture Minister, Wagner Rossi, and the UK’s Environment Secretary, Caroline Spelman, welcomed the opportunity for G20 Agriculture Ministers to move forward with concrete measures to address both the short-term and the long-term challenges of food price volatility. On 29-31 October 2011, the BRICS Agriculture Ministers – including Brazil – convened for their second meeting of Ministers of Agriculture and Agrarian Development to assess progress on the implementation of the 2010 Moscow World Food Security Declaration.
Therefore, Brazil is expected to call for action on food price volatility and food security at the G20 Summit.
Outcome: Combating food price volatility was one of the French Presidency’s major priorities. In the Final Declaration, member countries recognized that an open, transparent, and distortion-free trading system promotes food security. This was demonstrated by the launch of the Agricultural Market Information System (AMIS) on 15 September 2011 to improve market information. Member countries also pledged to mitigate excessive food and agricultural commodity price volatility. Finally, they welcomed the Action Plan on Food Price Volatility and Agriculture, which was adopted by G20 Agriculture Ministers on 22-23 June 2011.
Despite the disproportionate focus of the G20 Summit on the Eurozone debt crisis and the fragile world economy, Brazil is expected to urge member states to tackle the social agenda, particularly rising unemployment among youth and a lack of social protection measures. On 3 November 2011, Brazil defended an earlier proposal by the International Labour Organization (ILO) to implement a global initiative modeled after Brazil’s “Bolsa Família” – a social welfare program that seeks to reduce short-term poverty through direct cash transfers and long-term poverty through conditional cash transfers. Moreover, at a press conference on 4 November 2011, President Rousseff warned that economic turmoil in Europe and the US has moved G20 countries further away from efforts to improve the lives of the poorest of the poor, which triggers social challenges that compromise social cohesion.
Outcome: Consistent with Brazil’s employment agenda, the G20 renewed its efforts to combat unemployment, especially among youth who have been adversely impacted by the economic crisis. Fundamentally, member states announced the creation of a G20 Task Force on Employment that will provide input to the G20 Labour and Employment Ministerial Meeting, which will be held under the auspices of the Mexican Presidency in 2012. They also mandated International Organizations (such as the IMF, OECD, ILO, and World Bank) to report to Finance Ministers on the global employment outlook and how the G20’s Cannes Action Plan for Growth and Jobs will contribute to job creation. Finally, recognizing the importance of investing in national social protection strategies – such as access to health care and income security – for fostering balanced growth and social cohesion, member countries welcomed the report of the Social Protection Floor Advisory Group. Moving forward, Brazil’s social priorities are expected to feature prominently on the global agenda as Mexico succeeds France in presiding over the G20 Summit in 2012.
In the final analysis, Brazil achieved its major priorities – political, economic, and social – at the G20 Summit. Recognizing the limits of pushing forward its own agenda in the wake of the Eurozone (read: Greek) debt crisis, Brazil merits a score of B. Fundamentally, notwithstanding the long shadow cast by the preoccupation with the Eurozone, Brazil flexed its muscle – not least by convening the BRICS countries ahead of the Summit to coordinate emerging countries’ response to Europe’s ailing economy. Similarly, in her own assessment of the G20 Summit, President Rousseff declared that it was relatively successful.
Overall Score: B
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