Click to read page 1: Spitting the dummy, and changing the international order
Russian president Vladimir Putin wrote an article days before the September 2017 summit of the 5 BRICS nations (Brazil, Russia, India, China & South Africa) in Xiamen, China, espousing views on economic issues – and on a wide range of other matters of international politics, but especially on an extremely wide range of potential areas of co-operation among the 5.
The central message was this: The balance of power is changing.
For the BRICS partners, there was a call to work together in many spheres, which sounds enlightened & constructive but also faces many obstacles.
For New Zealanders, whose primary sources of foreign information used to be British and are now mainly American, it may take suspension of belief to digest the following statements and to accept them at face value, but that’s not why I’ve run them.
The reason they’re here is to show you the stated intent ahead of highly significant changes which may start to emerge in 2 months.
Key points of the Putin message:
“Russia highly values the multifaceted co-operation that has developed within BRICS. Our countries’ constructive co-operation on the international arena is aimed at creating a fair multipolar world and equal development conditions for all.
“Russia stands for closer co-ordination of the BRICS countries’ foreign policies, primarily at the UN & G20, as well as other international organisations….
“Russia also calls for promoting the interaction of the BRICS countries in the area of global information security. We propose joining our efforts to create a legal basis for co-operation and subsequently to draft & adopt universal rules of responsible behaviour of states in this sphere. A major step towards this goal would be the signing of an intergovernmental BRICS agreement on international information security….
“Russia is interested in promoting economic co-operation within the BRICS format. Considerable practical achievements have been recently reported in this area, primarily the launch of the New Development Bank (NDB)….
“Russia shares the BRICS countries’ concerns over the unfairness of the global financial & economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies. We will also work towards a more balanced distribution of quotas & voting shares within the IMF & the World Bank.
“I am confident that the BRICS countries will continue to act in a consolidated manner against protectionism & new barriers in global trade. We value the BRICS countries’ consensus on this issue, which allows us to more consistently advocate the foundations of an open, equal & mutually beneficial multilateral trade system and to strengthen the role of the WTO as the key regulator in international trade.”
Other BRICS leaders joined the charge
The 5 BRICS leaders followed those Putin lines of thinking in their joint summit declaration 4 days later:
“… 10. We agree to promote the development of BRICS local currency bond markets and jointly establish a BRICS local currency bond fund, as a means of contribution to the capital sustainability of financing in BRICS countries, boosting the development of BRICS domestic & regional bond markets, including by increasing foreign private sector participation, and enhancing financial resilience of BRICS countries….
“11. In order to serve the demand arising from rapid growth of trade & investment among the BRICS countries, we agree to facilitate financial market integration through promoting the network of financial institutions and the coverage of financial services within BRICS countries, subject to each country’s existing regulatory framework & World Trade Organisation (WTO) obligations, and to ensure greater communication & co-operation between financial sector regulators…. We agree to communicate closely to enhance currency co-operation, consistent with each central bank’s legal mandate, including through currency swap, local currency settlement, and local currency direct investment, where appropriate, and to explore more modalities of currency co-operation. We encourage the BRICS interbank co-operation mechanism to continue playing an important role in supporting BRICS economic & trade co-operation. We commend the progress in concluding the memoranda of understanding among national development banks of BRICS countries on interbank local currency credit line and on interbank co-operation in relation to credit rating….
“22. We appreciate the efforts & contribution of the BRICS Business Council & Business Forum to strengthening our economic co-operation in infrastructure, manufacturing, energy, agriculture, financial services, e-commerce, alignment of technical standards & skills development….
Changing global economic governance
“29. We resolve to foster a global economic governance architecture that is more effective & reflective of current global economic landscape, increasing the voice & representation of emerging markets & developing economies. We reaffirm our commitment to conclude the IMF’s 15th general review of quotas, including a new quota formula, by the 2019 spring meetings and no later than the 2019 annual meetings. We will continue to promote the implementation of the World Bank Group shareholding review.
“30. We emphasise the importance of an open & resilient financial system to sustainable growth & development, and agree to better leverage the benefits of capital flows and manage the risks stemming from excessive cross-border capital flows & fluctuation. The BRICS contingent reserve arrangement (CRA) represents a milestone of BRICS financial co-operation & development, which also contributes to global financial stability. We welcome the establishment of the CRA system of exchange in macroeconomic information (SEMI), and the agreement to further strengthen the research capability of the CRA, and to promote closer co-operation between the IMF & the CRA.
Looking to change in Africa
“31. We welcome the establishment of the NDB Africa regional centre launched in South Africa, which is the first regional office of the bank. We welcome the setting up of the Project Preparation Fund and the approval of the second batch of projects. We congratulate the bank on the ground-breaking of its permanent headquarters building. We stress the significance of infrastructure connectivity to foster closer economic ties & partnerships among countries. We encourage the NDB to fully leverage its role and enhance co-operation with multilateral development institutions including the World Bank & the Asian Infrastructure Investment Bank as well as with the BRICS Business Council, to forge synergy in mobilising resources and promote infrastructure construction & sustainable development of BRICS countries.
“Open & inclusive”
“32. We emphasise the importance of an open & inclusive world economy enabling all countries & peoples to share in the benefits of globalisation. We remain firmly committed to a rules-based, transparent, non-discriminatory, open & inclusive multilateral trading system as embodied in the WTO. We reaffirm our commitments to ensure full implementation & enforcement of existing WTO rules and are determined to work together to further strengthen the WTO. We call for the acceleration of the implementation of the Bali & Nairobi MCM outcomes and for the WTO ministerial conference to be held this year in Argentina to produce positive outcomes. We will continue to firmly oppose protectionism. We recommit to our existing pledge for both standstill & rollback of protectionist measures and we call upon other countries to join us in that commitment….
“34. We reaffirm our commitment to achieving a fair & modern global tax system and promoting a more equitable, pro-growth & efficient international tax environment, including to deepening co-operation on addressing base erosion & profit shifting (BEPS), promoting exchange of tax information and improving capacity-building in developing countries. We will strengthen BRICS tax co-operation to increase BRICS contribution to setting international tax rules and provide, according to each country’s priorities, effective & sustainable technical assistance to other developing countries…”
My newsletter Wednesday 7 February:
Stock markets have taken a tumble – no surprise. The question was the timing. Next, though, come 2 important questions: How big will that tumble be (here & particularly in the US)? And what other markets will the stock/bond shifts affect?
Commercial property yields have declined in keeping with the low/zero interest rates, but in many of the world’s markets property investors seem to have been trading for more superficial reasons than with defence against changes in the economic climate in mind….
The second question above – what other markets will be affected, and how? – may be answered with interest rate changes, though central banks will be loath to squeeze… And the availability of debt will be variable, from country to country – and, in this country, affected by the state Australia’s big 4 banks find themselves in…
Will New Zealand’s apartment & general residential markets be affected? Undoubtedly. NZ investors who are in both shares & property will find themselves squeezed on the share side of the equation, affecting their actions on the property side…
Foreign investment in NZ residential property was already about to be curtailed by the new government, immigration is declining slowly, Australia is unlikely to offer a strong economic alternative to the NZ workforce – conditions here are likely to tighten…
Interest rates need to rise (though not by a lot) to bring more sense to markets, but central banks around the word will, instead, be looking at how to turn tricks with debt… In that situation, while uncertainty may reduce property pricing, delay in raising interest rates would put a hold on that change…
Click to read page 1: Spitting the dummy, and changing the international order
31 January 2018: Trump changing longstanding rules of play on infrastructure
4 September 2017: BRICS leaders’ Xiamen declaration
1 September 2017, Vladimir Putin article: BRICS: Towards New Horizons of Strategic Partnership
Jim Rickards on Collide (subscription required)
CNN Money, 26 January 2018: The biggest infrastructure nightmare facing the US
29 December 2017: Federal Transport Department letter to New York state budget director
31 December 2017: New York state budget director response to Federal Transport Department
14 December 2017: Governors Cuomo & Christie announce commitment to fund 100% of states’ half of new Gateway tunnel
13 December 2017: New York state budget director letter to Federal Transport Department outlining funding agreement progress
New York governor Andrew Cuomo, 15 December 2017: Governor Cuomo signs “Buy American” legislation for all structural iron & steel on New York roads & bridges
Washington Post, 9 February 2018, opinion article by Dana Milbank: Trump concocted a story about a border agent’s death. The truth won’t catch up.
Attribution: BRICS, Vladimir Putin, Jim Rickards, CNN Money, New York State, US Federal Transport Department, Washington Post.