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World economy

Emerging nations will go on leading global GDP growth despite crisis

Forum organized by EL PAÍS unites experts including Brazilian ex-president Lula da Silva

Former Spanish Prime Minister Felipe Gónzalez and ex-Brazilian President Lula da Silva at the forum on Friday.
Former Spanish Prime Minister Felipe Gónzalez and ex-Brazilian President Lula da Silva at the forum on Friday.Samuel Sánchez

The crises that have been afflicting the world’s emerging nations – Brazil, Russia, China and South Africa, with the exception of India – have cast doubts over their future, but they will continue to be the main contributors to global GDP growth.

That was the conclusion reached by a panel of experts at the “The Challenge of the Emerging Nations” forum organized by EL PAÍS in Madrid on Friday.

“If we are talking about GDP growth, this will come from the emerging countries, which will continue contributing more than double that of developing nations,” said Núria Mas, an economics professor at the IESE Business School in Madrid.

Emerging countries will continue contributing more than double the GDP growth of developing nations” Núria Mas, economics professor at the IESE Business School

She said it was important to differentiate between the current negative circumstances and the potential of these economies, which remains in intact, though important reforms are needed.

At the start of the forum, EL PAÍS Editor-in-Chief Antonio Caño said the emerging countries were and would “continue to serve as reference points for global stability.”

They would also continue to be “reference points for the new world order, including in politics,” he said, adding that this had been demonstrated by the profound changes these economies had experienced in recent years and their growing role in global economic and political forums.

Compared to other periods, the impact of the crises facing the emerging nations is much more significant today because “of their importance to the world’s economy,” noted Emilio Ontiveros, professor of business economics at Madrid’s Autónoma University.

In fact, 30 percent of sales by multinationals around the globe come from companies based in emerging countries – something that is highly significant for the Spanish economy. “A good number of the companies that are key for configuring the indicators for Spain’s domestic and stock markets have significant interests in Latin America,” he said.

Ontiveros also highlighted the strong link between the economies of Brazil and Argentina, which will likely face a currency devaluation in the near future and could create more tensions in the region.

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“If Brazil doesn’t recover, it will be difficult for Argentina to emerge from its own crisis,” he said.

Germán Ríos, corporate director for strategic affairs at the CAF Development Bank of Latin America, said the key to the future of the emerging countries would be improving their infrastructure. He praised the creation of the Asian Infrastructure Investment Bank, which was initiated by China.

“The financial institutions that China has introduced are going to change the rules of the global financial system. They are going to permit that the emerging countries will be able to tackle the crisis using their own rules and own financing,” he said.

Otaviano Canuto, executive director of the administrative board at the International Monetary Fund (IMF), said there were three important characteristics in today’s global economy: the adjustment of interest rates in the United States “but not in other areas;” the slowdown of China’s economy; and the end to the “super cycle” of prices for raw materials.

In his opinion these transitions reflect the end of a long cycle of expansion and have contributed to a crisis “that still hasn’t ended.”

The forum also discussed the political scene and the changes it has experienced over the past 15 years.

Former NATO secretary-general Javier Solana said that since 2008 the international community had gone from relating on the basis of a strategic trust to a purely tactical trust.

However, Solano pointed out that despite the competition between the superpowers the possibility still existed of reaching agreements on important issues, such as non-proliferation, Iran nuclear disarmament and climate control.

The panelists also expressed their concern about the spread of populist movements.

The financial institutions that China have introduced are going to change the rules of the global financial system” Germán Ríos, corporate director for strategic affairs at the CAF Development Bank of Latin America

Pierpaolo Barbieri, executive director of Greenmantle, said that such movements had grown out of two failures of modern democracy – corruption and the lack of opportunities.

Speaking specifically about Venezuela and Argentina, he said that “There was economic growth in both countries but since the financial crisis there have been cracks in both systems.”

Nevertheless, he said that both societies had expressed their desire for change in recent elections.

If in Argentina they celebrated the shift from left-to-right “with Cristina Fernández de Kirchner, as much as it pained her, returning to private life,” he doubted that this would be possible in Venezuela “as long as [President] Nicolás Maduro goes on talking about punishing the people” over the results of the legislative elections.

During his address, former Brazilian President Luiz Inácio Lula da Silva defended his country’s recovery “from a circumstantial crisis that has lasted longer than it should have.” He also defended his successor President Dilma Rousseff, who is the target of several corruption investigations and facing impeachment proceedings.

“Dilma is a person with a lot of character and is very honest,” said Lula da Silva. But he warned that the political crisis she is now facing has “delayed the adoption of necessary reforms” that Brazil urgently needs.

Lula da Silva took part in a discussion with former Spanish Prime Minister Felipe González about the emerging countries, which was moderated by Juan Luis Cebrián, the chairman of PRISA, the group that publishes EL PAÍS.

Dilma is a person with a lot of character and is very honest” Former Brazilian President Luiz Inácio Lula da Silva

In Lula da Silva’s opinion, the impeachment process underway in the Brazilian Congress against Rousseff “will not go anywhere” and called it a “moral attack.” Still, he said, it was painting an international picture of the Brazilian economy that was worse than it really is.

Former Socialist Prime Minister González said that Spanish businesses should take advantage of the current situation “to invest in the Brazilian economy to help in its recovery.”

As for Venezuela, both former leaders called on Maduro to initiate dialogue with the opposition and other sectors to help the country emerge from its political and economic crises and strengthen democracy.

“What occurred in Venezuela was very important – it is the alternative. Maduro must understand that democracy doesn’t mean perpetual power,” the former Brazilian president said.

“It may appear that different circumstances exist after the December 6 results, but it is the same shocking situation. There exists the same need for dialogue between the Venezuelan government and the opposition,” González said.

English version by Martin Delfín.

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