Can BRICS rescue Argentina’s economy? | Business and Economic News

Buenos Aires, Argentina – Patricia Bullrich works the crowd. Speaking to more than 600 corporate representatives at the 2023 AmCham summit in Buenos Aires, the former left-wing rebel and current right-wing presidential hopeful admitted he would be a mere electoral „wish” in more stable times.

But these are not stable times in Argentina – the inflation rate is over 100 percent and poverty is close to 40 percent.

According to Bulrich, his „character and determination” could be salvation for a country saddled with a $44.5 billion debt to the International Monetary Fund (IMF) and a once-in-a-century drought that has halved its soy and wheat production. . Under these circumstances, would a Bullrich administration embrace membership in the BRICS — a brief alliance of US adversaries Russia and China with Brazil, India and South Africa?

„We are not going to BRICS,” he says during a question-and-answer session at the summit, adding that the „democracies” of the United States, Western Europe and Israel will be his geopolitical allies.

Buenos Aires Mayor Horacio Rodriguez Larreta, another leading candidate for president from the same center-right Juntos por el Cambio (Together for Change) coalition, made similar comments at an AmCham meeting this month, but said he was open to trade with any country. including those in the BRICS.

And yet, whoever wins this October’s presidential election may not have the luxury of pursuing their political beliefs in an increasingly multipolar world.

Argentina is facing its worst economic crisis since the 1998 to 2002 recession, when unemployment soared above 20 percent and more than half the population fell below the poverty line. Alberto Fernández, president of the center-left Frente de Todos (Front of All) coalition, has already announced he will not seek a second term.

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Argentina’s President Alberto Fernandez has announced that he will not seek re-election despite being eligible for a second term in 2023. [File: Ivan Alvarado/Reuters]

Last June, during a video conference with BRICS representatives and heads of state, Fernández requested full membership of the group on behalf of Argentina. More recently, Brazilian President Luiz Inacio Lula da Silva „promised to assist in the removal” [the IMF’s] A Knife from Argentina’s Neck”.

Whether the South American country will join BRICS before the October elections remains an open question. There is also no guarantee that membership will move the needle. It is clear, however, that Argentina can use all the help it can get.

„When you’re in the opposition, you can say whatever you want,” Vicky Murillo, director of the Institute for Latin American Studies at Columbia University in New York City, told Al Jazeera. “But if any coalition wins, the next government will have to focus more on Brazil and China. Those relationships are important enough to create ideological differences.

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Coined by a Goldman Sachs analyst in 2001, BRICS (later BRIC) is an acronym used to describe some of the world’s largest emerging markets. The countries held their first diplomatic summit in Yekaterinburg, Russia, in 2009, and the new federation added South Africa the following year.

Representing more than 40 percent of the world’s population, the BRICS were seen as a counterweight to the G7 countries, which have long dominated the global economy and its financial institutions. To that end, the group established the New Development Bank during its sixth annual summit in Fortaleza, Brazil, in 2014.

„The founding logic of a new development bank is to have an alternative financing mechanism that emphasizes the needs of developing countries over the needs of rich countries,” said Andres Aras, senior research fellow at the Center for Economic and Policy Research in Washington. DC, and a former Ecuadorian Minister of Knowledge.

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„Although its targets are ambitious, the NDB can only distribute $12 billion to member countries,” he told Al Jazeera. „But the BRICS countries themselves have trillions of dollars in reserves and Argentina has plenty of liquidity to refinance its debts.”

To understand why Argentina is pursuing a closer relationship with the BRICS, one need look no further than its recent loan from the IMF. In 2018, the fund gave $57 billion to then-President Mauricio Macri’s right-wing administration.

But instead of rebuilding Argentina’s crumbling infrastructure, the money was mostly used to finance capital flight — a violation of the IMF’s rules. The economy stalled, inflation soared to more than 50 percent in 2019, and voters ended Macri’s one-term presidency. His successor, Alberto Fernández, canceled the final installment of the debt, but his administration failed to stem the bleeding.

The Covid-19 pandemic, a costly war in Ukraine and this year’s historic drought have all helped boost the electoral prospects of Juntos por El Campio candidates, as well as Javier Millay of La Libertad Avanza (Freedom Advances) — a political outsider. Proposed dollarization of the Argentine economy.

„BRICS has the potential to redefine Argentina’s relationship with debt,” Julio Campina, an economist and professor at Argentina’s Rosario National University, told Al Jazeera. „Its investments will allow us to build a social economy that prioritizes the needs of people and families over transnational corporations. But this is still a theory.

Impeding Argentina’s potential entry into BRICS is its history of joining and then leaving international alliances, said Juan Gabriel Tokatlian, professor of international relations at Torcuato Di Tella University in Buenos Aires.

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In 1973, Argentina joined the Non-Aligned Movement – ​​a coalition of countries that stood against Cold War-era polarization and promoted the interests of developing countries – only to leave the group in 1991. South American countries before withdrawing in 2019.

„Argentina should enter BRICS only to enter because a government has a different political orientation, and it will be very expensive,” Togadlian told Al Jazeera. “At the same time, the BRICS countries must be sure that there will be new entrants to the alliance. So they make their own strategic calculations.

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