Brazil should join China’s new development bank
Observation: This article was published on March 19. On March 27, Brazil announced that it would join the Asian Infrastructure Investment Bank. This move will grant Brasília a seat the table during discussions about the birth of a potentially new order in Asia, a region that will be crucial to Brazil's development in the coming decades.
The decision by Europe's largest economies to become founding members of the AIIB, the new Chinese-led development bank is an unmistakable sign of the dawn of a more multipolar order. It is only a question of time before Japan, South Korea, Australia and eventually the United States will follow Great Britain's lead and join the Asian Infrastructure Investment Bank (AIIB), just like Germany and France have just announced. Policy makers in London, Berlin in Paris are right to support Beijing for a number of reasons.
First, being part of the new bank will allow European powers to participate in the decision-making process of what seems likely to become a key international financial institution over the coming decades. This will allow them to push for more rigorous environmental and human rights standards, but also strengthen their presence in a region that is in the process of reemerging as the world's economic center. London and Frankfurt are also competing for becoming the leading financial market place for Chinese capital. Even if the AIIB fails to take off (a possible scenario given how difficult it is to set up such a bank), the blame would be placed on China, not on the other member states.
In addition, a regionally well-integrated and accepted China is an important step towards assuring long-term stability in Asia. Irrespective of whether one believes that trade reduces the risk of war, joint regional infrastructure projects are widely seen as strengthening cooperation between governments in a region that still lacks a strong institutional framework.
While Washington tried to convince other countries not to join the AIIB (thus turning the issue into a diplomatic contest), the United States is unlikely to punish Britain and others for their move. The World Bank continues to enjoy ample support, and even a wildly successful Asian Infrastructure Investment Bank is unlikely to overshadow existing institutions anytime soon. Even World Bank Group President Jim Yong Kim welcomed the new multilateral infrastructure bank, saying there was a "massive need" for new investment in this area.
With a March 31 deadline looming for countries to gain “founding member” status, Brazil should be part of Beijing's initiative. While Brazil is already a member of the New Development Bank (often called BRICS Development Bank), there are signs that the AIIB will be larger and economically more powerful. While the NBD will invest in projects in the BRICS and other developing countries all over the world, the AIIB will focus on Asia alone -- a region that has long become far too important for Brazil to ignore. Today, China's "One Belt One Road" initiative (often simply called "OBOR") is known only to a small number of specialists in Brazil, yet Brazil's economic interests will increasingly be affected by it. China may already be Brazil's most important trading partner, but Brazilian diplomacy, academia, private sector and civil society must learn far more about China in order to understand the consequences of its rise.
Joining another developing bank in times of a domestic economic crisis may sound counterintuitive. The potential long-term benefits of being a founding member of the AIIB, however, could be considerable. Other countries that suffer from anemic growth, such as Italy, have expressed their desire to join. Even a small contribution would grant Brazil a seat at the table of the powerful. The next ten days offer Brazil a rare window of opportunity to become the AIIB's only founding member from the Western Hemisphere.
Photo credit: AFP/Yasuyoshi Chiba