Washington: A group of five leading emerging economies that has banded together to increase their global clout is again struggling to find common ground.
Expectations the so-called Brics (Brazil, Russia, India, China and South Africa) would come up with a collective plan to offer support to debt-crippled European nations were high as their top finance officials met in Washington this week.
From their conception 10 years ago as an acronym created by a Goldman Sachs economist, the Brics have gone a long way to become a new political group that held its first summit two years ago in Russia.
Some of its members such as Brazil, inspired by forecasts that the group’s combined economy will eclipse that of rich countries by 2050, envision a great political role for the group in the global stage.
In the run-up to their meeting on Thursday, Brazil floated the idea of the Brics committing billions of dollars to buy bonds issued by the euro zone or to bolster multilateral lenders such as the International Monetary Fund (IMF).
But the meeting produced only a vague statement that they were “open to consider, if necessary, providing support through the IMF or other international financial institutions ... depending on individual country circumstances.”
India’s Reserve Bank of India (RBI) governor D. Subbarao poured cold water on Brazil’s grand plans, noting the huge demand on his government’s resources for poverty reduction at home.
China also distanced itself from the idea, saying the question of providing the IMF with more resources was a topic for a broader group of countries, including rich ones.
Russia was even more blunt. Speaking to reporters after a joint Brics news conference, Russian deputy finance minister Sergei Storchak said the purchase of European bonds by the group was “impossible.”
One official attending the meeting said the news conference was “one of the most idiotic” he had ever attended.
The Brics, who have an interest in ensuring Europe’s debt crisis does not start washing up on their shores, did not detail how much money they could potentially provide, nor did they mention the possibility of purchasing European bonds.
In theory, they could have a big impact as a group. Taken together, these fast-growing economies sit on foreign reserves just short of $4.5 trillion, although the lion’s share of those riches -- some $3.2 trillion -- belongs to China.
Brazilian finance minister Guido Mantega, trying to explain to reporters on Friday why the Brics disappointed expectations, repeated that the group was willing to support the euro zone through the IMF.
Mantega said specifics about how much money they could provide, either to the fund or directly to the euro zone, were not discussed because the Europeans had not requested help.
“That is the point: the Europeans need to say what they want,” he said. “We concluded there is no specific demand.”
The truth, however, is that Brics countries are really focused on their own issues, said Greg Fager, director of the Asia/Pacific Department at the Institute of International Finance, a bank lobbying group.
“The domestic economy dominates their world,” Fager said. “They know they need to take a greater role in the global economy but they are still dealing with their own issues.”
For now, Fager said, the Brics’ main role in fighting the global crisis is to keep their economies growing -- something they have been successfully doing so far.
Even if the Brics could commit billions of dollars to the IMF or directly to troubled European countries, that would still do little to ease their problems, said Chilean finance minister Felipe Larrain, who was also in Washington to attend the annual meetings of the IMF and World Bank.
Only the European Central Bank (ECB), Larrain said, could really help the euro zone now by fully backing the sovereign debts of its members.
“If I said I’m going to give a press conference tomorrow about how Chile can save Europe, I think people would be highly skeptical,” he said.