Dilma on the Brics bench can bring prestige ballast to Brazil – 03/31/2023 – Igor Patrick

Dilma Rousseff arrived smiling at the headquarters of the New Development Bank (NDB) in Shanghai, ready to lead one of the few concrete implementations of the partnership initiated by the Brics. Surrounded by smiles and pomp, the former president lands in China fulfilling an old wish of Lula’s: to reclassify her image in an international post worthy of one of the main cadres of the PT.

Dilma’s bureaucratic and technical profile is common knowledge for anyone who has closely followed her career in Brasilia. Little used to political articulation, the former president was known for her diligence, which will be very welcome in the NDB. A career economist, she also brings to her resume the fact that she was one of the main articulators of the creation of the bank — the foundation was even announced in Fortaleza, during the 2014 Brics summit.

The NDB’s ambitions have always been high. It was never intended to replace more consolidated alternatives such as the World Bank or the Inter-American Development Bank, but the objective was clear: to help finance developing economies, especially in infrastructure and sustainable energy transition.

Criticism abounded as soon as it began operating — economists found its criteria for project funding unclear, while social and environmental safeguards did not seem clear-cut — but the NDB made progress. Governance rules are much more mature today and, if Brazil and India still resist the expansion of the Brics itself, at least in the bank the arrival of new members was welcome: Egypt, Bangladesh, United Arab Emirates and Uruguay joined the institution, and the expectation is to soon attract other relevant developing economies such as Argentina, Thailand, Nigeria and Turkey.

Dilma’s challenges ahead of the NDB, however, will not be small. In August of last year, Fitch, one of the main credit rating agencies in the world, downgraded the bank’s investment grade from AA+ to AA with a negative outlook. The movement, quite rare in multilateral institutions, was mainly caused by the War in Ukraine and the subsequent sanctions against Russia.

In the statement justifying the decision, Fitch says that the NDB remains dependent on issuing long-term bonds at low rates in the US, passing on the cost of funding to borrowers. With the sanctions, there are doubts as to the continuity of access to the American capital market, mainly because Russia still owns around 20% of the bank. A potential blockade would jeopardize the liquidity of the assets and put the tax structure in check, which also made Fitch reclassify the strategic investment risk in the NDB from “moderate” to “high”.

On the geopolitical side, China and Russia may even have reached historic levels in recent years, but at the other end, relations between Beijing and the Indians have cooled considerably, especially after the border disputes that in 2020 and 2021 led to aggressive clashes in the valley. from Galwan. Brazil and South Africa are also only now beginning to recover from domestic instability that for years paralyzed the cooperation agenda and shelved infrastructure projects that could very well be financed by the NDB.

The Brazilian press may even have given unnecessary emphasis to Dilma’s salary at the head of the institution, but it will be in the delicate management of these barriers until the end of her term in 2025 that we will need to keep an eye on. The task of qualifying the Brics bank in such a complicated scenario will be herculean, but if successful, Dilma will certainly bring prestige to Brazil as a whole.

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