Why Challenge the Washington Consensus Now?

A number of outlets are reporting on the BRICS move to establish a competitor to the World Bank.

The so-called BRICS countries agreed to form an international development bank with aspirations to challenge the dominance of the World Bank and the International Monetary Fund.

Leaders of Brazil, Russia, India, China and South Africa said Tuesday that the New Development Bank will start with $50 billion in capital and $100 billion as a currency reserve fund for liquidity crises. Operating details still need to be resolved.

Still, the BRICS bank, which could add more member nations, represents a bid to expand the influence of the BRICS emerging markets and act as a counterbalance to institutions run by the U.S. and other developed nations, experts said.

“This is about the consolidation of BRICS 2.0,” said Marcos Troyjo, professor of international and public affairs at Columbia University and co-director of the BRICLab Center. “If BRICS 1.0 was about capturing investor attention to the scale of their economic relevance, BRICS 2.0 is about embarking on institution building.”

I absolutely understand the reason for the move. These large countries have been demanding more influence over the World Bank for years, to no avail. And US policies like Quantitative Easing have been really damaging to some of the countries, particularly Brazil. Though, this move may well come too late for Brazil and certainly for Dilma Roussef.

“I don’t think that if Brazil was now to be thinking about these plans from the drawing board, it would really be thinking about a Brics development bank,” says James Lockhart-Smith, a Latin America risk analyst at Maplecroft in New York. “It would be more focused on restarting growth in the country.”

But at a time of slow growth, Brazil probably needs these economies on side more than ever. Add to that, trade with economically troubled Argentina – traditionally one of its biggest trading partners – has become more difficult in recent years.

So while I understand the move, I wonder why now — aside from the fact that the World Cup provided a handy excuse for a meeting in Rio de Janeiro. It may be too late for Dilma, and India’s new neoliberal Prime Minister Narenda Modi seems like an odd fit for the group.

Meanwhile, consider this. While Russia won’t get any of the big perks in the new bank (it will be headquartered in Shanghai, India will pick the first President, Brazil will pick the first Chairman, and the bank will be denominated in — really! — dollars), Putin was also making other interesting moves in the hemisphere, at least according to RT (definitely click through for Putin’s expression, which surely is staged to be that stern).

Moscow and Havana have reportedly reached an agreement on reopening the SIGINT facility in Lourdes, Cuba – once Russia’s largest foreign base of this kind – which was shut down in 2001 due to financial problems and under US pressure.


Russia considered reopening the Lourdes base since 2004 and has sealed a deal with Cuba last week during the visit of the Russian President Vladimir Putin to the island nation, reports Kommersant business daily citing multiple sources.

Russia shut down the base to more easily reschedule debt held by the US. Along with reopening the base, Russia will forgive a bunch of outstanding Cuban debt to Russia.

The timing of this — a year after Snowden’s disclosures, but more importantly, as the US continues to try increasingly unilateral sanctions against Russia’s involvement in Ukraine — makes a ton of sense. The US refuses to believe it can’t impose its will in Ukraine, in spite of increasing reluctance from our European partners, especially Germany, to ratchet up the pressure. Reopening a front in America’s back yard as the US bunkers down on Ukraine makes perfect sense.

For some reason, the US appears to have believed it could simply impose its will indefinitely on the rest of the world. They appear not to have considered that, at some point, such behavior would provide the rest of the world cause to fight back.

10 replies
  1. decader says:

    I’d suggest Russia thinks it can impose its will on Ukraine as well.

    I’m rather critical of US foreign policy, but compared to Stalin/Beria’s atrocities in Ukraine & Crimea, and Yeltsin/Putin leveling Chechnya, I’ll stick with the milder US version – especially tied to the much more enlightened EU.

  2. TarheelDem says:

    Why now? Because they can with little ability of the US to mount an opposing strategy.

    The US is tied down in Ukraine, Iraq, Afghanistan, and stalled for the moment in moving ahead on agreements with Iran. NATO is well armed but useless for much of anything. The Congressional deadlock prevents shifts in the legislative authority for new policies or funding for new initiative. And the BRICS countries are under extreme popular pressure to deliver what the US has been incapable of delivering over the past six years — a modicum of prosperity.

    Now let’s see how the BRICS countries use the fact of this development bank to blow off punitive IMF and World Bank loans. Argentina is a test case IMO.

  3. Greg Bean (@GregLBean) says:

    The new BRICS bank was announced almost 18 months ago http://www.cnbc.com/id/100596232

    The latest announcement is only that a contract has been signed to support it.

    What I’m more interested in is when the BRICS internet that was announced almost 12 months ago will be unveiled. https://www.privateinternetaccess.com/blog/2013/09/logical-for-brics-countries-to-build-their-own-internet-infrastructure-circumventing-u-s-surveillance/

    The west and its corrupted mode of operation in international finance and illegal surveillance has simply created a market opportunity that BRICS is filling.

    And I for one think it is very clever. Further, Brazil will likely pull many South and Central American countries with it and South Africa may pull many African nations into the BRICS fold. China, Russia and India are important enough trading partners that they may drag in many nations as well; by example, can Australia really afford to give up its trade with China simply for protection from the US, or will Germany continue to be treated like a poor cousin in an insulting relationship if something more equitable is offered by BRICS, and what then of the rest of Europe?

    BRICS is a competitive monster that in my estimation will actually be the driving force for better behavior from the dominant western block. The competition is long past due.

  4. Don Bacon says:

    Why now?
    To add to what THD said–
    Because team USA is on the ropes politically in many places especially on Ukraine.
    NYTimes analyst:
    Ukraine is nearly broke. With the West unlikely to pay the staggering costs needed to right Ukraine’s economy, Moscow expects Kiev will have to find a way to restore its longstanding ties with Russia. In particular, it needs to reach an agreement with Moscow on natural gas supplies, now cut off, before temperatures start dropping in November. Russia also could use a deal over water, electricity and other supplies that used to flow to Crimea from Ukraine.
    Of course if the Kyev junta continues its aerial bombing of eastern Ukraine cities, which were (not any more) full of middle class, industrialized ethnic Russians, there won’t be much (economic) Ukraine left. Which is possibly what the US wants, since the US is probably directing events there.

  5. Les says:

    They’ll keep trying. How many years did the U.S. and the IMF keep the pressure on Yugoslavia’s economy? It’s much easier to break apart a country than it is to keep it together, especially when the economic measures they prescribe are intended to harm the economy and force sale of state assets to the West.

  6. P J Evans says:

    For some reason, the US appears to have believed it could simply impose its will indefinitely on the rest of the world. They appear not to have considered that, at some point, such behavior would provide the rest of the world cause to fight back.

    It’s been a problem for a long time (think: Reagan). They’ve gotten out of the habit of negotiating with anyone, or thinking that Joe Average will do anything other than What Government Says, and it’s starting to bite them back.

  7. TarheelDem says:

    The critical difference between this attempt and previous attempts to create a global financial alternative is that in this case you are looking at an agreement from the 1st, 2nd, 5th, 9th, and 25th most populous nations who also have the 2nd, 7th, 8th, 10th, and 29th largest GDPs. And three of the countries are nuclear powers. Previous attempts involved much smaller and much poorer nations that lacked the resources to prevent them from being pushed around.

    Hopefully those facts are not lost on the US foreign policy establishment. They will not be able to treat the BRICS countries like they treated Gadhafi.

    • Tom in AZ says:

      “Hopefully those facts are not lost on the US foreign policy establishment. They will not be able to treat the BRICS countries like they treated Gadhafi.”

      Maybe, but as Churchill said (sort of), only after doing every stupidly wrong thing first….

  8. SBayer says:

    The timing and location of the announcement have nothing to do with recent events. The BRICS summit is held annually (this is the sixth) and the location of each is scheduled more than a year in advance of the meeting. The 2015 summit will be in Ufa City, Russia. Note also that the summit was not in Rio de Janeiro, but in Fortaleza, 1300 miles north of Rio.

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