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- Brazil is calling for more funding distribution to developing economies by the IMF.
- Bitcoin might be a good asset to balance global economic inequality.
Brazil is pressing Western-backed lenders to provide more for developing countries if they expect them to remain relevant.
The Latin American nation plans to table its concerns during the next International Monetary Fund (IMF) meeting. This would not be the first time that Brazil is demanding an adjustment of the IMF funding quotas. Markedly, Brazil and many other developing nations believe that a major redistribution of the quota is necessary to correct the underrepresentation of large emerging-market economies.
The subject has suddenly gained more traction recently because the price of inaction is growing higher, according to Tatiana Rosito, International Affairs Secretary at the Brazilian Finance Ministry. She cited the launch of some financial institutions like the New Development Bank by the BRICS (Brazil, Russia, India, China, and South Africa) Group, to show a new trend amongst developing countries that are trying to show economic independence.
During an interview with Bloomberg, Rosito said:
The developing world has not stayed still while reforms stall. The creation of the New Development Bank by the BRICS and the Asian Infrastructure Investment Bank show that emerging countries are looking for ways to finance their own development.
This time around, Brazil President Luiz Inacio Lula da Silva is looking to push for the reform of the IMF and World Bank by leveraging on the G20 Presidency. He had previously called for changes during the last United Nations Security Council meeting which was held in September. As the IMF meeting draws closer, Finance Minister Fernando Haddad is getting set to take the president’s message to the multilateral lenders in Marrakesh.
Kristalina Georgieva, IMF’s Managing Director also agrees with Brazil that the Washington-based lenders need to make certain adjustments to align with the changes taking place in the world economy. She strongly believes that there would be devastating consequences if the institution is unable to restore confidence in these developing nations.
United States Holds Largest IMF Quota, Bitcoin to Balance the Equation?
From the current distribution, the United States holds a major percentage of the IMF quota (17%), and China with the world’s second-largest economy holds only 6%. Brazil was able to grasp only a little above 2% of the quota and as it stands, it does not appear that there would be any alterations to voting shares in December when the current fund quota would be reviewed.
The U.S. is not in support of shifting voting weight to countries unless they are “respecting the roles and norms of the IMF and working to strengthen the international monetary system,” Jay Shambaugh, the U.S. Treasury’s undersecretary for international affairs said in what many tags a reference to China.
While Rosito agrees with Brazil on a redistribution of the IMF quota in favor of emerging countries, she also believes that the United States is making a valid argument about increasing quotas to replace existing bilateral arrangements.
With more complexity plaguing the global economy and political discourse, Bitcoin might be an asset to break the stalemate, redistribute financial equity, and bring about better inclusion for emerging economies. The BRICS block of which Brazil is a founding member is exploring this asset as an option to displace the Dollar hegemony and in the long term, it might form the basis to back the current demands from Brazil.
