BRICS or the Great Wall

BRICS or the Great Wall

Прошло несколько месяцев после того, как Министр иностранных дел Эктор Тимермен заявил о том, что Аргентина может стать членом БРИКС (Бразилия, Россия, Индия, Китай и Южная Африка). Однако все, казалось бы, забыли о его словах, несмотря на повышенный интерес к китайско-российским инвестициям и на постоянное присутствие Бразилии, как, безусловно, самого важного соседа Аргентины.

Only five months have passed since Foreign Minister Héctor Timerman jumped the gun by announcing Argentina as a future member of BRICS (Brazil, Russia, India, China and South Africa) and yet everybody seems to have forgotten this initiative — despite the intense interest in Sino-Russian investment and despite Brazil’s eternal presence as by far the most important neighbour.

Wooing China and Russia under a BRICS umbrella might seem the most elegant way of expressing that interest, especially with the Mercosur partnership with Brazil strained to the utmost during the neighbour’s yet to be concluded electoral campaign, yet there is not the slightest attempt to revive BRICS overtures. This feeds suspicions that luring investment might not be the whole agenda — there is also the desire to make the point that Argentina is fundamentally shifting its global alignment away from the United States and the European Union toward the two biggest emerging markets, China and Russia. In short, more interest in making new enemies than new friends (a strategy we have come to expect from Kirchnerism).

The BRICS angle could also be used to try and keep Brazil aboard via the investment prospects of their bloc partners but instead Mercosur is being placed at the mercy of an irate Brazilian electorate. The guiding principle for the centre-right’s Aécio Neves (who must fancy his run-off chances after securing the key Marina Silva endorsement over the weekend) would seem to be ABM — short for “anything but Mercosur” rather than “automated banking machine.” Having expressed enthusiasm throughout the campaign for the Pacific Alliance trade bloc as the more dynamic half of the subcontinent, Neves now talks of advancing negotiations with both the US and the EU. But should the incumbent Dilma Rousseff shrug off this powerful challenge, the status quo would not necessarily survive. The simultaneous Uruguayan election campaign has already led the way in calling for Mercosur to be downgraded from a customs union to a free trade zone (all three leading candidates are unanimous on this point) and Dilma might well be tempted to reduce future friction with Argentina by following suit.

Government zealots might imagine that making overtures to China and deepening hostility with the US feed each other but do the Chinese see it that way? Rather than rivals, the relationship between the world’s two economic superpowers has in many ways been symbiotic in recent years with the US boosting China’s trade surplus while Beijing finances its fiscal deficit. Of course, a 35-year concession for Vaca Muerta shale in return for a few billion dollars to see the Cristina Fernández de Kirchner administration through an electoral year (and perhaps even a surreptitious payment to pay off the vulture funds) would be too good an opportunity to miss but a Chinese sugar daddy should not be taken for granted. The fact that China counts its foreign currency reserves in trillions rather than billions like everybody else should not mask the growing insolvency of its overheated economy — debt already doubles Gross Domestic Product and a soft landing is by no means assured. While China grapples with the housing bubble which inevitably accompanies prolonged growth (that is also why it is trying to slow its growth), its huge infrastructural investments are a major part of that bubble — there would have to be a good reason for expanding outlay in that area on Argentina’s behalf. Of course, CFK gifting shale in exchange for some campaign shekels would be a good enough reason, quite apart from Argentina’s current value as a soy supplier.

Aside from awaiting the final results in Brazil, it also remains to be seen whether CFK will be taking her new geopolitics to next month’s G20 meeting in Queensland or whether she will stick to seeking to impose her obsession with the vulture funds on the agenda — if the latter, she is going to find that exclusive club of nations far more evenly divided than last month’s 124-11 vote in the United Nations General Assembly with almost a three-way split between sympathizers, the hostile and the neutral. If she does try to pit the emerging markets against a developed world denying her credit, she will find that the mechanics of a G20 summit and a UN General Assembly are usually very different.

Meanwhile Brazil has been providing almost the only bright stock exchange news worldwide on the back of optimism about the run-off chances of Neves. The MerVal index here has plunged over 20 percent in this month starting with the change of Central Bank helm (and not just because of the change of head but also policy in cracking down on the operations which enabled the Bolsa to be used as a back-door bureau de change) but the factors behind this fall are not purely local. In the same period Wall Street has fallen several percent for various reasons (including Ebola) and might well have dipped even more were it not for a “flight to quality” already under way from emerging markets.

Last week’s column warned against over-optimism concerning Vaca Muerta because of oil prices trending firmly downward since mid-year with every reason for that tendency to continue, given the shale revolution in the United States and the aforementioned Chinese policies of slower growth — this has become an increasingly common theme in this week’s press as oil prices recede toward the 80-dollar mark. Yet there is a bright side to these dimmer prospects. Argentina’s fuel import bills have been inexorably climbing for some years now and last summer’s maxi-devaluation marked a further turn of that screw, making the trend seemingly irreversible. Yet the combination of mounting recession here and lower oil prices in the world is accomplishing what had appeared impossible and might well end up halving this year’s fuel import bill — a couple of billion dollars have already been saved.

Talking about last summer’s devaluation, its effect will be fully lost any day now due to inflation with the independent estimates thereof topping an annual 40 percent for the first time this year. The new Central Bank Governor Alejandro Vanoli is printing money as if it were going out of fashion — 400 million pesos in just one day this week — while Economy Minister Axel Kicillof seems to reason that if the correlation between money supply and inflation is not absolute, then it must be non-existent. At this rate, can even recession stop inflation?

Оригинал публикации: http://www.buenosairesherald.com/article/172279/brics-or-the-great-wall