Brazil Joins India, Rejects China's BRI

Brazil has become the second BRICS nation after India to reject China's Belt and Road Initiative, citing concerns over potential debt traps and seeking alternative collaborations with Chinese investors.

By K J M Varma, Beijing   Oct 29, 2024 10:46

Beijing, Oct 29 (PTI) In a major setback to China's BRI, Brazil has decided against joining Beijing's multi-billion-dollar initiative becoming the second country after India in the BRICS bloc not to endorse the mega project.

Brazil, headed by President Lula da Silva, will not join the Belt and Road Initiative (BRI) and instead seek alternative ways to collaborate with Chinese investors, Celso Amorim, special presidential adviser for international affairs, said on Monday.

Brazil wants to “take the relationship with China to a new level, without having to sign an accession contract”, he told Brazilian newspaper O Globo.

“We are not entering into a treaty,” Amorim said, explaining that Brazil does not want to take Chinese infrastructure and trade projects as “an insurance policy”.

According to Amorim, the aim is to use some of the Belt and Road framework to find “synergy” between Brazilian infrastructure projects and the investment funds associated with the initiative, without necessarily formally joining the group, the Hong Kong-based South China Morning Post quoted him as saying.

The Chinese “call it the belt [and road] … and they can give whatever names they want, but what matters is that there are projects that Brazil has defined as a priority and that may or may not be accepted [by Beijing]”, Amorim said.

The decision contradicts China's plans to make Brazil's joining of the initiative a centrepiece of Chinese President Xi Jinping's state visit to Brasilia on November 20, the Post reported.

Officials from Brazil's economy and foreign affairs ministries recently voiced opposition to the idea, it said.

The prevailing opinion in Brazil was that joining China's flagship infrastructure project would not only fail to bring any tangible benefits for Brazil in the short term but could also make relations with a potential Trump administration more difficult.

Last week, Amorim and the president's chief of staff Rui Costa travelled to Beijing to discuss the initiative. According to sources, they returned “unconvinced and unimpressed” by China's offers, the Post reported.

Lula did not attend this month's BRICS summit at Kazan due to an injury and his close associate and former Brazilian President Dilma Rousseff currently heads the Shanghai-based BRICS New Development Bank (NDB).

BRICS originally consisted of Brazil, Russia, India, China and South Africa. Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates have been admitted as new members.

Brazil will be the second member of the BRICS after India not to endorse the BRI.

India was the first country to voice reservations and stood steadfast in its opposition to BRI, a pet project of Chinese President Xi Jinping to further the global influence of China with investments to build infrastructure projects.

India has protested against China for building the USD 60 billion China-Pakistan Economic Corridor (CPEC), stated to be the flagship project of the BRI through the Pakistan-occupied Kashmir (POK) in violation of its sovereignty.

India is also vocal about its criticism of BRI projects stating they should be based on universally recognised international norms, good governance, and the rule of law and follow principles of openness, transparency and financial sustainability.

China subsequently faced criticism that the BRI projects in smaller countries like Sri Lanka, especially for its take-over of the Hambantota for a 99-year lease as a debt swap turned out to be debt traps resulting in a deep financial crisis in both smaller countries.

Indian diplomats here point out that besides staying away from three annual high-profile meetings of the BRI in Beijing in the past few years, India continued to voice its opposition to it both in the BRICS and Shanghai Cooperation Organisation, (SCO).

US Trade Representative Katherine Tai recently urged Brazil to view the proposal to join BRI through an “objective lens” and “risk management".

The Chinese embassy in Brasilia called her remarks “irresponsible” and “disrespectful”.

China's state-run Global Times in an editorial on Monday termed Tai's comments against BRI as “steeped in the spectre of "Monroe Doctrine".

“Brazil does not need others to dictate who to cooperate with or what kind of partnerships to conduct, and the normal economic and trade cooperation between China and Latin American countries should not be subject to scrutiny from third countries," it said.

“Currently, the US is attempting to build a "small yard, high fence" against China in Brazil and other Latin American countries”, it said.

"The cooperation between China and Brazil not only aligns with the interests of both countries but also meets the need for the Global South to build a more just and equitable international economic order. This trend is something that Washington cannot stop,” it said.

Source: PTI

https://money.rediff.com/news/market/brazil-joins-india-rejects-china-s-bri/17780120241029

Can BRICS Break the Dollar’s Grip? The Global Shift Toward De-Dollarization

 For over eight decades, the U.S. dollar has held a dominant position as the world’s leading reserve currency, shaping global finance under the mantle of US dollar hegemony. 

Written by Team Colitco November 4, 2024 5:40 pm

https://colitco.com/brics-de-dollarization-global-shift/

However, an emerging alliance of nations under the BRICS banner—Brazil, Russia, India, China, and South Africa—is not just questioning this supremacy but actively seeking to reshape the international financial structure, making it less reliant on the greenback. The 2024 BRICS summit was a testament to this determination, as it heavily focused on exploring pathways to a multipolar world in currency and trade.

At the summit in Johannesburg, Russian President Vladimir Putin declared that the momentum toward “de-dollarization” is both “irreversible” and accelerating. BRICS leaders, including Brazilian President Luiz Inacio Lula da Silva, emphasised the need for options beyond the dollar—a sentiment resonating with developing economies across the Global South as they seek independence from the dollar-centric system.

Economic Sanctions and Rising Interest Rates Spur De-Dollarization

The push for alternatives is not new, but recent geopolitical developments have intensified this drive. Economic sanctions against Russia over the Ukraine conflict, including freezing foreign reserves and limitations on SWIFT access, spotlighted the vulnerabilities inherent in dollar dependency. China, too, has faced sanctions through restrictions on semiconductor exports, which further motivates Beijing to secure its global financial stance through other means, including boosting renminbi influence.

“The US’s weaponisation of the dollar in sanctions has triggered a wave of interest in alternative currencies for trade and investment,” said Shirley Ze Yu, a senior visiting fellow at the London School of Economics. Rising U.S. interest rates, which have escalated the cost of dollar-denominated debt for developing nations, have added urgency to the search for other currencies, particularly for countries like Brazil and South Africa.

Could a BRICS Common Currency Become a Reality? Experts Express Doubt

Some speculate that BRICS+ members, which could potentially include other emerging economies, might introduce a shared currency as an alternative to the dollar. A proposed BRICS common currency pegged to a basket of BRICS-member currencies or gold has captured the imagination, but experts remain sceptical.

Gustavo de Carvalho, a South African Institute of International Affairs policy analyst, described the currency as a “long-term goal at best.” According to Danny Bradlow, a professor at the University of Pretoria, a BRICS currency would require extensive institutional support and common economic values—challenging to achieve given the diverse economic landscapes of BRICS countries. Chris Weafer, a strategic analyst, argued that such a currency could end up dominated by China’s massive economy, making smaller economies hesitant to relinquish their monetary autonomy. These potential challenges underscore the complexity of the de-dollarization process.

Local Currencies Gain Traction in Bilateral Trade

For now, BRICS is promoting local currencies in bilateral trade. Russia and China, for instance, now primarily trade in rubles or yuan, and India and the UAE have begun to settle transactions in rupees. This move offers some protection from dollar dependency but introduces practical challenges, such as limited currency convertibility.

“The use of local currencies is promising but challenging,” said Weafer. “Each country would need to hold reserves in their partner’s currency, and challenges like India’s capital controls make this difficult.” This complexity underscores the appeal of a more integrated BRICS financial system while highlighting the existing barriers.

Dollar to Remain King—For Now

Despite these efforts, experts agree that dethroning the dollar will be a long journey. Weafer estimates that any serious challenge to the dollar’s dominance remains “decades away.” Even if BRICS+ adopts a shared currency, it will face significant competition from the dollar, which remains the benchmark for global commodities.

South African BRICS ambassador Anil Sooklal emphasised that BRICS does not aim to replace the dollar but offers alternative options. The Pan-African Payment and Settlement System, which facilitates trade within Africa outside of SWIFT, is an example of the multipolar vision BRICS leaders advocate for.

While the BRICS expansion continues to build momentum, the dollar’s liquidity and established infrastructure keep it firmly at the centre of global finance. The drive for a multipolar system may be underway. However, meaningful shifts away from the dollar will likely unfold gradually, over a long period of time. The greenback will maintain its influential role in the foreseeable future, and any significant challenge to its dominance remains ‘decades away.’

https://colitco.com/brics-de-dollarization-global-shift/

Why Does China’s Foreign Minister Want India to Put the Border Dispute on the Back-Burner?

 Beijing is keen to swiftly normalize relations with India so that the Indian PM attends the upcoming BRICS summit in China.

By Sudha Ramachandran

March 29, 2022

https://thediplomat.com/2022/03/why-does-chinas-foreign-minister-want-india-to-put-the-border-dispute-on-the-back-burner/

Weeks after the India-China clash at Galwan Valley, Indian Prime Minister Narendra Modi visited Leh, Ladakh on July 3, 2020.

Credit: Wikimedia Commons/ India, Press Information Bureau

Chinese Foreign Minister Wang Yi’s sudden visit to India on March 25 laid bare the strikingly different approaches of the two countries to normalization of bilateral relations. While China would like to put the border dispute on the back-burner to normalize relations with India; New Delhi believes that normalization is not possible so long as the situation at the border is unstable.

The entire China-India border is disputed. The two countries fought a border war in 1962 in which China occupied a chunk of territory in Aksai Chin in Ladakh. In the decades since, the situation at the Line of Actual Control was more or less stable although incursions did happen periodically.

In April-May 2020, Chinese soldiers ingressed at several points into the Indian side of the LAC. The two sides clashed violently at Galwan Valley in June that year, and since then the two sides have been locked in a tense military standoff. Fifteen rounds of military talks and eight diplomatic discussions have taken place so far, and while these have led to troops pulling back from Galwan, Pangong Tso, and Hot Springs, agreement on disengagement from other friction points remains elusive.

Wang’s visit was the first by a top-ranking Chinese official to India since the 2020 standoff began.

In New Delhi he is said to have put forward a three-point proposal. “First, both sides should view the bilateral relations from a long-term vision,” he said. China and India should “put their differences over the border issues at a proper position in the bilateral relations.” Second, the two countries “should view each other’s development with a win-win mentality” and third, they “should take part in the multilateral process with a cooperative posture,” China’s state-run Xinhua News Agency reported.

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In other words, China wants India to set aside the current crisis at the border and work with China on other issues. India should not put broader cooperation on hold till the border dispute is resolved. Instead, it should cooperate with China with regard to economic development as in the Belt and Road Initiative, for instance, and forge common positions with Beijing at global forums.

Wang’s three-point proposal is not new. Deng Xiaoping had suggested back in 1988 that India and China should leave the border dispute “for future generations to resolve.” India went along with this proposal, hoping that cooperation in other fields would build bilateral trust, paving the way for a settlement of the border dispute.

However, while cooperation, especially trade, did grow rapidly, the border dispute has festered and only grown in complexity. Enhanced trade, which is heavily tilted in China’s favor, has only increased India’s dependence on China and not helped resolve the border dispute.

Wang’s three-point proposal, which was a reiteration of China’s old approach of prioritizing normalization of relations over settling the border dispute, is therefore unacceptable to India now.

India’s Minister for External Affairs S. Jaishankar reportedly stressed that “restoration of normalcy” in China-India relations “would require restoration of peace and tranquility at the border.” Elaborating on this point at an interaction with the media soon after the talks with Wang, Jaishankar said: “So long as there are very large deployments in the border areas” that violate the 1993 and 1996 India-China agreements, “the border area situation is not normal.”

“The frictions and tensions that arise from China’s deployments [along the LAC in Ladakh] since April 2020,” the Indian foreign minister said, ”cannot be reconciled with a normal relationship between two neighbors.”

Beijing is keen to declare the China-India relationship to be normal. China is hosting an in-person BRICS summit later this year and will be keen to ensure the summit’s success. This would require the leaders of all BRICS member-states to be present at the meeting.

Wang was in New Delhi to ensure that Prime Minister Narendra Modi will attend the BRICS summit. This and not the border dispute was likely to be uppermost on his agenda in the Indian capital — hence, his prioritization of normalization of relations and his call to India to put the border crisis on the back-burner.

In 2017, India and China were locked in a 73-day-long military standoff at Doklam, at the Bhutan-China-India trijunction. Then on August 28 that year, the two sides reached agreement on an “expeditious disengagement of border personnel at the face-off site at Doklam.” It cleared the way for Modi’s participation at the BRICS summit that China hosted in Xiamen in September 3-5.

Is Wang’s three-point proposal aimed at smoothing the way for Modi to participate in the upcoming BRICS summit?

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The possibility of Modi participating in the BRICS summit cannot be ruled out. After all, it will be India’s turn to host the G-20 and the Shanghai Cooperation Organization summits next year and India would want President Xi Jinping to be present at these summits.

India would do well to recall what unfolded at Doklam after the August 28, 2017 deal was sealed. As agreed upon, India and China did indeed swiftly disengage their troops from the faceoff site at Doklam. However, within a few weeks of the BRICS summit, media reports pointed out that Chinese soldiers were returning to the site of the crisis and had resumed construction of a road to the Jampheri Ridge (it was China’s construction of this road that had triggered the crisis in June). A few months later satellite images available in the public domain showed the Chinese building several military structures, including a full-fledged military complex, helipads, and trenches, just 81 meters from the point where the two were locked in an eyeball-to-eyeball confrontation in 2017.

Declaring “restoration of normalcy” – what the Chinese want – at the border without achieving disengagement of troops and de-escalation along the LAC will leave India vulnerable again in the Himalayas. New Delhi must not agree to business as usual until the military threat along its Himalayan border has receded.

https://thediplomat.com/2022/03/why-does-chinas-foreign-minister-want-india-to-put-the-border-dispute-on-the-back-burner/