Brazil's President Dilma Rousseff had some reason to be pleased with herself this week.
Not only did she host on Monday a successful meeting of the leaders of the Brics – the five large developing countries that also include Russia, India, China and South Africa and account for a quarter of the world's gross domestic product. But her diplomats had also overcome a late disagreement between India and China over who should host the headquarters of the group's $100 billion Brics development bank, with Shanghai winning the privilege.
"Shanghai is a great financial centre," Ms Rousseff said afterwards, seeking to explain the choice of the Chinese city. Her finance minister, Guido Mantega, added: "It is close to the great Asian powers."
India will provide the bank’s first president as consolation for not getting its headquarters. But although the Brics have sought to paint the new institution as an equal partnership, the selection of Shanghai speaks to a stark truth about the central role of China in the grouping.
Each of the other Brics is most strongly connected to the group through its relationship with China, which in turn sees them as new sources of energy and minerals, as markets for its products and as like-minded partners on international trade and strategic issues.
"Without a shadow of a doubt the principal country from an economic standpoint is China," said Roberto Dumas Damas, an economist at Insper business school in São Paulo.
Among the Brics, the most important relationship is between China and Brazil, the grouping's second-biggest economy. This is shown by China's president Xi Jinping's extensive visit to Brazil. Following the Brics summit, he attended a meeting of the Brics leaders in Brasília with Latin American heads of state and started a state visit to Brazil.
China’s commercial relationship with Brazil and indeed, the rest of Latin America, is symbiotic, analysts say. Brazil and the region have grown from being providers of iron ore and other minerals, soyabeans and agricultural produce, to also being consumers of Chinese manufactured goods and destinations for investment from Beijing, particularly in oil and infrastructure.
“The Chinese need natural resources and Brazil has them,” said Damas. Brazil also offers Beijing a solid base in Latin America from which it can broaden its drive for influence.
After Brazil, Xi Jinping will launch his second trip through the region since becoming president. Last year, he visited Costa Rica and Mexico. This year he will visit states where China has energy interests, notably Venezuela and Argentina, as well as Cuba. Venezuela, already a major borrower from China, is seeking a fresh $4billion credit line.
In Argentina, meanwhile, China's offshore oil company Cnooc has a 50 per cent stake in local energy group Bridas, which Argentina would like to see commit itself to its gigantic shale formation, Vaca Muerta.
Among the other Brics nations, India sees China as an ally to press the west on trade talks and multilateral forums as well as an important commercial partner. Russia and South Africa, like Brazil, sell natural resources to China. Russia also sees China and the rest of the Brics as a buffer against western pressure especially over its alleged role in the Ukraine conflict.
With China, such a central figure in the Brics, it makes sense for Brazil and the other partners to support having the new bank's headquarters in Shanghai, said Marcos Troyjo of the BRICLab forum at Columbia University.
“It is very difficult on a bilateral basis to have close encounters, let’s say, with decision makers in China,” said Troyjo. “But if you have a permanent body that deals with development [and] economic issues, you can simply access your delegate in Shanghai.”
For the Brics' democratic leaders, however, the danger is they will be seen as swapping one set of hegemonic powers – the US and Europe, which control the World Bank and the International Monetary Fund – for another, China.– (Financial Times)
