BRICS Summit 2012

India and the BRICS

1
India and the BRICS
March 2012
BRICS Summit 2012
2
Published by Gateway House: Indian Council on Global Relations
rJ loor Cecll Court MKBhuxhun Murg Next to Regul Clnemu Colubu Mumbul

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Contents
Introduction
InJluBruzll Ploneerx of u new Jevelopment ugenJu
Fxtefunu Murchdn

InJluRuxxlu 1uklng euch other xerlouxly
Kutherlne Foxhko
InJlu Flnunclul Regulutory Fxporter
K N VulJyunuthun
Why lx South Afrlcu u BRIC
Allxhu Plnto
InJluBruzll An Afrlcun colluborutlon
Fxtefunu Murchdn
Chlnu unJ InJlu Slowlng growth vx Stulllng growth
Munjeet Krlpulunl unJ Bob owllng
Bewure of cheup lenJlng from Chlnu
Sumlr N KupuJlu
4
O
ver the last decade, countries known under the emerging markets acronym of BRICS, have
begun to seiiously ueine theii common inteiests anu values Biazil Russia Inuia China anu
South Afiica have helu thiee summits so fai in Russia Biazil anu China 0n Naich they will
meet again, this time in New Delhi, with the goal of addressing the global economic condition,
iefoiming inancial anu iegulatoiy institutions anu impioving coopeiation with each othei on a
host of inteinational issues fiom staiting a BRICS uevelopment bank to inteichanging high tech
skills While these issues uiiectly impact them they also affect much of the ueveloping woilu
Though uiffeient in size anu iesouices the BRICS nations as a gioup aie massive they account
foi of the woilu population of global uBP anu of iecent global giowth Togethei
they have the potential to cieate a futuie mouel foi otheis
As an inuepenuent maiketfocuseu Inuian think tank uateway Bouse has been ueeply investeu
in the futuie of Inuia anu its BRICS counteipaits What is the best way to uevelop affoiuable
housing foi laige population nations What is the best way to secuie long teim manageable
eneigy supplies Can healthcaie be ueliveieu moie eficiently en masse anu to iemote iegions
Bow much sustaineu giowth is iequiieu to making one of these laige nations succeeu Bow can
the inlationgiowth tiaueoff be manageu Is theie a bettei way to piouuce anu uelivei foou
than with only laige scale enteipiise Can the BRICS be lenueis of best iesoit foi each othei
Bow to best take auvantage of the globalization of technology
The summaiies of ieseaich papeis in this booklet begin to offei some answeis In InuiaBiazil
Pioneeis of a new uevelopment agenua ieseaichei Estefania Naichn examines the possibili
ties foi Inuia to biing affoiuable housing technology to Biazil while Biazil offeis its expeiience
with piogiammes to uevelop pioitable small faims anu uelivei cash payments with mouein
netwoiks to the pooi Naichan then looks at how the lessons fiom InuiaBiazil coopeiation
might be passeu on with goou iesults to Afiica
In InuiaRussia Taking each othei seiiously Russia Stuuies ieseaich fellow Katheiine Foshko
looks at why a oncehealthy InuiaRussia ielationship has gone into quietuue anu suggests that
a tech ievival shoulu be auvanceu Infoimation technology in paiticulai is an aiea wheie Inuia
shoulu capitalize on the plethoia of euucateu anu talenteu Russian piofessionals anu Russia can
beneit fiom the size as well as the expeitise of the Inuian laboi pool she wiites
Similaily K N vaiuyanathan the foimei executive uiiectoi of Inuias Secuiities anu Exchange
Boaiu anu senioi ueoeconomics Fellow makes a case that Inuias caieful uelibeiate appioach
to peimitting inancial ueiivatives on its exchanges piotecteu it fiom the iavages of the
global ciash It has cieateu a mouel foi BRICS anu othei ueveloping countiies which aie seeking
to giow while insulating theii inancial maikets fiom global shocks
Renu Noui an piofessoi at the 0niveisity of Numbai who uiiecteu its Afiican Stuuies Centei
points out that while South Afiica might have been inuucteu into the BRICs club as a gift its
gieatei as a gateway to the billionpeison Afiican continent

Theie aie also cautionaiy notes The two laigest nations Inuian anu China aie both expeiienc
ing slowei giowth but theii outcomes coulunt be moie uiffeient wiite uateway Bouse execu
tive uiiectoi Nanjeet Kiipalani anu auvisei Bob Bowling China is engineeiing a slowuown to
encouiage a consumei economy but Inuia is heauing foi a uangeious stall that must be ieveiseu
Neanwhile ieseaichei Samii N Kapauia explains that while China is a fiienuly bankei to BRICS
its lenuing comes with stiings attacheu
We hope you enjoy the oiiginal thinking these iueas auu to the foimal BRICS agenua
Munjeet Krlpulunl
Fxecutlve lrector
Gateway House: Indian Council on Global Relations
Mumbul
Murch
Introduction
5
InuiaBiazil Pioneeis of a new uevelopment agenua
~ Estefana Marchn
E
xpectations aie high foi the fouith
summit of Biazil Russia Inuia China
and South Africa, to be held in New Del
hi on Naich th With economic ciisis
ablaze in the Euiozone anu signs of anoth
ei global iecession anticipation is mount
ing foi how the leaueis of the socalleu
BRICS will address the world economic
slowdown and how far
they will push to iefoim
the institutions of global
goveinance
Yet with the spotlight on
the economy a piomis
ing and tangible devel
opment agenua coulu
be oveilookeu At eveiy
summit, members have
ieneweu theii pleuge to
stiengthen coopeiation
on social piotection
public health foou secu
iity anu agiicultuie But
little has been achieved
so fai Foi Inuia home
to one third of the
woilus pooi these ef
foits shoulu be a piioi
ity
The potential beneits
of coopeiation aie espe
cially cleai in the case of Biazil Inuia anu
Biazil have ueclaieu inclusive uevelop
ment an impeiative anu have engineeieu
creative solutions to meet their devel
opmental challenges But both also face
many obstacles to equitable uevelopment
some of which can be overcome through
mutual learning and targeted bilateral in
vestment
Biazils Zeio Bungei stiategy foi in
stance, has been successful at reducing
poveity inequality anu hungei by uevel
oping pioitable small faims anu uelivei
ing cash to pooi families thiough innova
tive payment systems As the uebate iages
in Inuia about how best to ieuuce poveity
cuib giowing inequality anu boost agii
cultuial piouuction Biazils expeiience
can help
Biazils social schemes aie among the
woilus best taigeteu anu theyie tians
paient They have uemon
strated how to streamline
the delivery of services
across all levels of gov
einment By collaboiat
ing with Biazil Inuia can
impiove the ieach anu
eficiency of its own no
toriously leaky schemes,
incluuing the Public Bis
tribution System, whose
losses are estimated to be
aiounu a yeai
There are of course vast
differences between the
two countiies Inuias pooi
aie twice Biazils entiie
population foi example
But that shoulunt stop
India from borrowing
some goou iueas Its not
necessary for India to in
uisciiminately auopt cash
tiansfeis oi othei Biazil
ian schemes to beneit fiom knowleuge
shaiing Inuia can leveiage its piivate sec
toi skills to scale up piogiams
In tuin Biazil can beneit fiom Inuias in
novatois who aie inuing novel ways to
pioviue the countiys lowincome popu
lation gieatei access to piouucts seivic
es anu employment that enhance living
stanuaius Inuia has piouuceu the woilus
cheapest cai electionic tablets that cost
laige successful ietaileis that link
thousands of rural workers to modern
uiban maikets anu familysizeu apait
ments in cities that sell foi In the
India and Brazil have
declared inclusive devel-
opment an imperative
and have engineered
creative solutions to
meet their develop-
mental challenges. But
both also face many
obstacles to equitable
development some of
which can be overcome
through mutual learn-
ing and targeted bilat-
eral investment. .
6
affoiuable housing sectoi the longteim
oppoitunities foi paitneiships with Inui
an entiepieneuis aie paiticulaily signii
cant Biazilian oficials pieuict a ueicit of
million homes foi lowincome families
in the next yeais
In healthcaie the beneits of an Inuia
Biazil collaboiation aie alieauy eviuent
Faceu with common uiseases anu limiteu
iesouices Inuia anu Biazil have useu each
other, challenging the international intel
lectual piopeity iegime to combat BIv
AIBS In foi example Biazil bioke a
patent on an antiietioviial uiug piouuceu
by Neick Phaimaceutical in the wake of
iising uiug costs Inuian iims weie the
only piouuceis of the geneiic veision of
the uiug anu Byueiabaubaseu Auiob
inuo ultimately pioviueu Biazil with the
active ingieuient to piouuce it It was es
timateu that this woulu save Biazil
million thiough
Biazil has taken auvantage of theii joint
campaign foi gieatei access to lifesaving
meuicine anu seen an extiaoiuinaiy ue
cline in BIvAIBS Recognizing such syn
eigies Inuia anu Biazil have investeu
million each in joint ieseaich on common
uiseases thiough the InuoBiazil Science
Council This alliance can anu shoulu be
stiengtheneu
Bealthcaie poveity alleviation anu mai
ketuiiven social innovation aie just a few
aieas wheie coopeiation between these
poweis can piouuce bioau social beneits
A foimal paitneiship is neeueu between
Biazils Ninistiy of Social Bevelopment
anu Fight Against Bungei anu Inuias Cen
tial Planning Commission to institution
alize knowleuge shaiing anu technical co
opeiation on social piotection piogiams
Chambeis of commeice incluuing FICCI
anu the InuiaBiazil Chambei of Com
meice can uiive piivate sectoi collaboia
tion connecting Inuian anu Biazilian en
tiepieneuis
At a time when both countries are be
ginning to use foieign aiu as a uiplomat
ic tool it is tempting to iegaiu them as
competitois But these countiies shoulu
insteau iecognize each othei as stiategic
paitneis anu pioneeis of a new uevelop
ment agenua one that piagmatically au
uiesses the neeus of ueveloping nations
Inuia anu Biazils stiategies foi inclusive
uevelopment aie complementaiy anu to
gethei holu gieat value
Foieign aiu pioviueu by BRICS countiies
has moie than uoubleu since anu
the surge is intimately tied to their efforts
at iefoiming global goveinance Since the
enu of Woilu Wai II global goveinance has
been a Westeinleu enteipiise The iules
that govein aiu anu inluence the uevelop
ment of other nations have been made by
the victors of the war and have evolved
to iest within a small gioup of poweiful
countiies which now face a selfmaue
ciisis With the iise of these new poweis
paitneiships that once seemeu weak aie
gaining tiaction Piime Ninistei Nanmo
han Singh should take advantage of his
position as host of the upcoming summit
to uiive a new uevelopment agenua
Estefana Marchn is the head of Latin America Studies at Gateway House: Indian Council on Global Relations, Mumbai.

InuiaRussia Taking each othei seiiously

I
n Becembei Inuian Piime Ninistei
Nanmohan Singh went to Noscow foi
the InuiaRussia summit It was the
th such highlevel meeting since the
accession of Russian Piime Ninistei foi
meily Piesiuent vlauimii Putin to powei
in
Putin has enjoyeu steauy visibility anu
populaiity foi his iole in Inuia he is cieu
iteu foi ieviving ties that hau laggeu in
the s In geopoliti
cal terms, the two coun
tries are strategic allies
whose wider goalsthe
puisuit of a multipo
lai woilu especially in
Euiasia stability in Af
ghanistanalign, or at
least do not clash, with
one anothei Russia sup
poits Inuias gaining
full membeiship in the
Shanghai Coopeiation
0iganization while Inuia
has uisplayeu none of
the suspicion of Westein
countiies at Putins ie
cent pioposal iegaiuing
the foimation of a Eui
asian 0nion The iela
tionships piogiess has
recently been marked
by two events Russias
completion of two nucleai ieactois at the
Kuuankulam plant in Tamil Nauuamiust
piotests fiom the local populationanu
the iecipiocal easing of the visa iegime foi
Indian and Russian businessmen to ad
uiess theii woefully unueipeifoiming bi
lateial tiaue anu investment iegime
But aie meetings enough to lift the Inuo
Russia ielationship fiom the benign ne
glect of the past An unpieceuenteu
Nemoianua of 0nueistanuings N00s
were signed between the two countries
at the summit in but many such as
the N00 envisaging joint piouuction of
modern oncological medicine in the Rus
sian Feueiation anuoi puichase of iaw
mateiials have been too vague to leau to
tangible iesults The goveinmenttogov
einment exchanges that woikeu so well
in yeais past aie lately pioving countei
piouuctive oi uowniight obstiuctionist
iesulting in signiicant misunueistanu
ings Foi instance even the stalwait In
uoRussian uefense coopeiation suffeieu
a hiccup in the last yeai when Inuia by
passeu Russian Nius foi an billion
uefense piocuiement ueal with the E0
RussiaInuias majoi aims
suppliei since the s
subsequently ienegeu on its
pieplanneu wai games with
Inuia in late Nay
Soon aftei Putins Septembei
announcement of his piesi
uential ambitions a iesponse
in the Russia Inuia Repoit
a supplement of the oficial
Russian government news
papei Rossiyskaya gazeta
claimed that Russia had a di
veisiication plan of its own
the powei balance in the
RussiaInuiaChina equation
may shift especially in light of
vlauimii Putins visit to China
and resulting agreements on
bioauening of RussianChi
nese economic coopeiation
from traditional industries to
high technology inuustiies anu signing
billion ueals This is moie than an iule
thieat Chinas bilateial tiaue with Russia
fai exceeus Inuias at billion anu saw
giowth in That makes Chi
na Russias biggest tiaue paitnei anu it
impoits a laige amount of Russian uefense
mateiiel At Putins visit to China in 0cto
bei the two noith Asian neighbois
signed varied agreements on energy and
hyuiopowei anu also cieateu a mutual
investment funu uepenuent on contiibu
tions fiom piivate uonois Immeuiate ie
sults came in the foim of sixteen economic
anu tiaue coopeiation ueals acioss a bioau
swath of sectors including new machinery,
electionics anu agiicultuie
~ Katherine Foshko
Now, in the midst of
the global economic
slowdown, is the time
for the two countries
to use their history of
cooperation and po-
litical goodwill to ad-
dress their respective
economic needs and
market gaps by boost-
ing joint innovation.

Biiectly iesponsible foi this iesult weie

the delegations of leading businessmen
from China and Russia brought to the state
meeting anu given the oppoitunity to in
teiact with each othei Neanwhile be
cause of the lack of effective introductory
mechanisms InuoRussian piivate coop
eiation is limiteu to smallscale tiaue anu
investment fora, none of them tied to state
visits Inuia cleaily neeus to leain fiom the
vigoi anu uigency piesent in the Russia
China ielationship anu above all fiom its
focus on piivate sectoi engagement
The ielationship can take a step in that ui
iection Noueinisation of its own econo
my is at the top of the Russian leaueiships
agenua anu will extenu to its bilateial ties
as well This is the time foi Inuia to ieally
push foi sophisticateu hightechnology
coopeiation with its olu fiienu anu stia
tegic paitnei The best oppoitunities in
the bilateial ielationship which piomise
immediate results are those that incubate
Russian science anu hitech concepts by
using Inuias technological ecosystem
anu infiastiuctuie foi joint piojects In
foimation technology in paiticulai is an
aiea wheie Inuia shoulu capitalise on the
plethoia of euucateu anu talenteu Russian
piofessionals anu Russia can beneit fiom
the size as well as expeitise of the Inuian
laboi pool Foi Inuia the size anu scope of
the teams and trials involved will not only
piomote innovation but also pioviue em
ployment anu encouiage maiket giowth
in new technologies
Theie aie alieauy some joint hitech pio
jects in the pipeline 0ne such is a ventuie
with the Skolkovo Innovation Center, a
planneu hitech business aiea just outsiue
of Noscow anu the emblem of the Russian
goveinments focus on innovation An No0
between Tata Sons anu Skolkovo Founua
tion involving joint ieseaich anu uevelop
ment in communication and IT was signed
in Yet its iealisation as that of the
Skolkovo Center which has been under
constiuction since anu is yet incom
plete iemains uistant Nanotechnology as
well as anothei pioneeiing science bio
technology, has also been on the agenda
since the summit given that the costs
of commeicialising anu piloting nano anu
bio solutions aie highei in Russia than
in Inuia Cleaily a few No0s on coopeia
tion wont make the cut whats neeueu is
a moie wiueianging anu systematic plan
wheie the goveinment can pioviue initial
suppoit anu latei allow the piivate sectoi
to take ovei
India and Russia can launch such initia
tives as goveinmentfunueu stuuy tiips foi
iepiesentatives of innovative IT business
es to visit theii counteipaits in Inuia oi
Russia and, even more crucially, create the
iistevei InuoRussian IT foium Piivate
initiatives eg cosponsoieu by oiganisa
tions like NASSC0N in the two countiies
can auu to the one existing joint IT cent
ei by encouiaging the foimation of joint
ventures between IT organisations and
scientists This can cieate ventuie funus
foi collaboiative RussianInuian piojects
which woulu beneit fiom Inuian ielation
ships in the outsouicing inuustiy anu Rus
sian ielationships in higheienu computei
science ieseaich in thiiu countiies Foi
instance Russian specialists have expeii
ence in the automatisation of embedded
systems piogiams which they can cooiui
nate with Inuian IT piofessionals Togeth
ei the two can excel in such joint piojects
that involve scientiic piogiamming to be
useu among otheis in space exploiation
an aiea which Inuia is tiying to iapiuly
uevelop
Now, in the midst of the global economic
slowdown, is the time for the two coun
tiies to use theii histoiy of coopeiation
anu political goouwill to auuiess theii ie
spective economic neeus anu maiket gaps
by boosting joint innovation 0nly then
will Inuias most impoitantyet uiscon
ceitingly uoimantgeopolitical paitnei
ship ieceive a muchneeueu lift
Dr. Katherine Foshko is the Russia Studies Fellow at Gateway House: Indian Council on Global Relations, Mumbai.

Inuia Financial Regulatoiy Expoitei

~ K. N. Vaidyanathan
E
uiope is in a inancial uaze uieece is
unuei seveie piessuie Even ueiman
banks, normally the most stable, are reel
ing unuei losses of billions of uollais Now
voteis in the 0S feu up with joblessness
anu a ueepei iecession aie campeu out
in Wall Stieet piotesting anu uemanuing
iefoim of politics anu inance The West
once vieweu as the uominant nation anu
institutionbuiluei especially by emeig
ing maikets anu the unueiuevelopeu
world, is unable to follow
its own piesciiptions foi
giowth anu fieemaikets
Fai fiom it its economies
carry systemic market
iisks anu misplaceu incen
tives which impact socie
ties They aie haiuly mou
els foi the woilu to follow
Then what is
Tiy Inuia Inuia has long ex
poiteu its soft stiengths
A thousand years ago, the
Chettiars from South In
uia tiavelleu to South East
Asia anu helpeu establish
banking anu moneylenu
ing systems in these coun
tiies The oveilay of colonialism uissolveu
many of those systems But in the last ive
years, India has once again begun build
ing the inancial anu iegulatoiy systems
of othei nations Since Numbais
NultiCommouities Exchange NCX has
set up exchanges in Singapoie Bahiain
Nauiitius Botswana anu Bubai The Na
tional Stock Exchange NSE has set up
the surveillance system for the Colombo
Stock Exchange anu iuns the ceitiication
piogiam in ueiivatives in both Colombo
anu Nauiitius The two national ueposi
tories, NSDL and CDSL, have agreements
to shaie best piactices with theii coun
teipaits in the 0S }apan Russia Taiwan
Koiea Nalaysia anu Euiocleai
This is one aiea wheie Inuia leaus China
Sure, in many emerging nations, China
has taken the leau ieauily helping them
tuin theii back on the Westein mouel of
uevelopment by builuing theii haiu in
fiastiuctuie anu extiactive inuustiies
But now those same countries many af
fected in some form by the wave of recent
democracy movements are looking with
uigency at builuing soft infiastiuctuie
like markets and regulatory and institu
tional fiamewoiks Anu they aie tuin
ing theii gaze upon Inuia a similaily ue
veloping nation with long expeiience of
capital maikets uemociatic values anu
inuepenuent iegulatoiy
institutions built around
affordable and robust
stiuctuies Noie ielevant
Inuias conseivative anu
inclusive inancial iegula
tory system has insulated
it fiom the global inancial
ciisis making it a compel
ling case stuuy especially
foi emeiging maikets
Inuias inancial expoit
model is based on a system
at home that has uevelopeu
affordably and robustly,
though cautiously, with
Indian government and
regulators working to en
sure this emerging market
uoes not iun aheau of itself Beiivative
piouucts weie intiouuceu only aftei ex
tensive consultations between the regu
latoi Secuiities anu Exchange Boaiu of
Inuia SEBI anu cential bankei Reseive
Bank of Inuia RBI exchanges maiket
paiticipants anu inuustiy expeits Touay
India has a thriving derivatives market in
inuex anu single stocks cuiiencies anu
inteiest iate futuies The T settlement
system suppoiteu by a uaily maigin ie
gime that iequiies even institutional in
vestois to comply helpeu Inuian stock
markets avoid defaults and systemic col
lapses thiough the global inancial ciisis
of The National Stock Exchange
anu the Bombay Stock Exchange BSE
cuiiently iank amongst the top ive ex
changes in the world in terms of trading
volumes Fiom tiaues a yeai in
volumes have giown to ovei
billion tiaues in Inuia was the
Many countries are
looking with urgency
at building soft infra-
structure like markets
and regulatory and
institutional frame-
works. And they are
turning their gaze
upon India

iist countiy to gliue aheau in ietail inves

toi piotection it abolisheu entiy loaus
on mutual funus back in way aheau
of the 0Ks plans to uo so in
Inuias auaptable anu affoiuable systems
aie ieplicable foi similai emeiging mai
kets around the world and there are a
swelling numbei of them especially in Af
iica anu the Niuule East which aie look
ing beyond the once unassailable western
systems The inancial evolution of these
emeiging maikets is impoitant they aie
the global uBP contiibutois of the futuie

Foi now theii systems aie infant anu not
inuepenuent In Afiica foi instance cui
iently moie than countiies up fiom
in have stock exchanges but
only have an inuepenuent maiket ieg
ulatoi In Zimbabwe Rwanua Namibia
Nozambique uhana Cameioon anu Bot
swana the stock exchanges uouble up as
iegulatoi but aie evaluating sepaiation
In the Niuule East which has stock ex
changes up fiom six just yeais ago
countiies like Lebanon anu Kuwait aie in
the piocess of establishing inuepenuent
maiket iegulatois Eight of these maikets
have been created only in the last 15 years
anu aie tiying to evolve into majoi play
ers by attracting both resident and for
eign investois
These markets share commonalities but
are a stark contrast to the rest of the
woilu They aie iesouiceiich coiiupt
anu waitoin income anu wealth uis
tiibution aie skeweu Theii expeiience
with iisktaking has been limiteu to life
not money In theii saving anu investing
habits they focus moie on ietuin of piin
cipal than ietuin on piincipal ie theii
ability to take the iisk of loss of piincipal
is low
Cential banks often play the iegulatois
iole acioss all inancial maikets The State
is mostly the copiomotei of enteipiises
along with leugling piivate sectoi entie
pieneuis it is also the uominant playei in
these economies anu most often the pio
viuei of iist anu last iesoit to its people
In short, these countries are not internally
ieauy oi geaieu to auopt the moie sophis
ticateu westein mouel of capital maikets
as pass thiough stiuctuies baseu on ca
veat emptoi wheie all iisk is boine by the
investoi
Nigiation to capitalism anu fiee maikets
theiefoie neeus to be caiefully planneu
with a long teim peispective calibiateu
to manage the downside risk of instabil
ity while implementing plans to cieate a
vibiant inancial maiket Because many
of these countiies aie pooi the piocess
has to be inclusive with a focus on the less
piivilegeu anu moie vulneiable The ieg
ulatory framework has to strike a balance
between maiket uevelopment anu inves
toi piotection
Inuian iegulatois unueistanu this They
remain conscious of the larger role that
inancial maikets have to play anu the
inluence it has ovei the economy This
alignment piotects Inuia fiom the excess
es witnesseu by othei maikets In the
billion scam of IT outsourcer Satyam, the
Indian government and regulators came
togethei to inu a new buyei anu piotecteu
the interests of stakeholders investors,
customeis anu employees This appioach
to pioblemsolving in staik contiast to
the alliounu loss causeu by Enion will
inu iesonance in emeiging maikets
Of course, Indian markets have some dis
tance to tiavel in impioving quality anu fie
quency of coipoiate uisclosuies it neeus
quaiteily inancial statements incluuing
cash lows stiengthening checks on pio
moteis piotecting majoiity shaieholueis
and migrating to international accounting
stanuaius Anu Inuia neeus to oveicome a
laigei pioblem If the Westein institutions
can be chaigeu with iegulatoiy captuie
by uominant maiket paiticipants iesulting
in excesses theii Inuian counteipaits aie
consiueieu coiiupt anu pione to compio
mising theii inuepenuence to goveinment
inluence
The challenge is to institutionalize islanus
of excellence anu integiity thiough tech
nology tianspaiency anu stability in policy
foimulations Inuias globallyiespecteu IT
industry has already shown it can achieve
these goals New Belhi now must seiiously
tackle these issues soonest, or risk losing
a new stellai expoit affoiuable ieliable
iobust inancial iegulation foi the emeig
ing maikets anu peihaps foi the batteieu
inancial maikets of the West
K. N. Vaidyanathan is the former Executive Director, Securities and Exchange Board of India. He is also a Member
of the Finance Board at IIM, Ahmedabad and is Gateway Houses Senior (Adjunct) Fellow for Geo-economics.
11
In South Afrlcu oflclully becume
u member of BRICS CompureJ wlth the
other BRICS countrlex South Afrlcux
xlze populutlon unJ economy ure qulte
xmull o you thlnk thut Nlgerlu woulJ
be more reprexentutlve of xubSuhurun
Afrlcu Whut vulue Joex South Afrlcu
uJJ to BRICS
BRICS is not uecisively about a politico
economic giouping of compaiable eco
nomicuemogiaphic statuie though that
is certainly one of the determining factors
in ueciuing the membeiship South Afii
cas entiy into the BRICs on Becembei
was a Chiistmas gift to itself Even
though it has a much smallei population
anu economy as compaieu to Nigeiia oth
er factors worked in its favour its vast
natural resources such as gold, diamonds
anu platinum its excellent infiastiuctuie
its establisheu coipoiate footpiints a cul
tuie of innovation easy access to inance
foi business a stable macio anu micio i
nancial climate, an advanced banking sys
tem, and functioning regulatory frame
woiks
South Africa is already the voice of the
continent at vaiious inteinational foiums
It is poiseu to seive as a base as well as
a gateway for investment from the BRICS
countries to the vast market of a billion
Afiicans
But Nigeiia has a place too If we take into
account the luiu natuie of inteinational
politics anu constellations like BRICS oi
Nigeiias vision a uevelop
ment goal uesigneu in to take the
countiy to the league of the top econo
mies of the woilu by we might have
BRINCS anu Nigeiia might step in to be
the western gateway to the continent!
1o whut extent Joex South Afrlcu uc
tuully reprexent the better JevelopeJ
purtx of xubSuhurun Afrlcu
Africa, the second largest and the most
populous continent aftei Asia has na
tions with diverse history and growth
tiajectoiies South Afiica is uiffeient fiom
the othei BRICS membei states it has a
unique histoiy anu a uiffeient economic
tiajectoiy It uoes not liteially iepiesent
the other African countries but it does
shaie the conceins of othei states of sub
Saharan Africa about democracy, coun
tering violence, dealing with issues of law
anu oiuei economic inequality social anu
cultuial uiveise populace poveity anu
unemployment
Chlnu puxheJ for South Afrlcu to joln
BRICS ln ecember In October
South Afrlcu JenleJ the ulul
Iumu u vlxu to uttenJ the blrthJuy cele
brutlonx of fellow Nobel Iuureute ex
monJ 1utu Wux thut u truJeoff
Though unsaid, the China factor is clearly
eviuent in South Afiicas entiy into the
BRICS China is ueinitely the most uom
inant constituent of the BRICS It has
massive inancial stakes in South Afiica
mainly in banking, infrastructure, min
ing tianspoit anu ienewable eneigy Foi
example the Inuustiial Commeicial Bank
of China ICBC has a massive investment
of billion iupees billion a
stake in South Afiicas Stanuaiu Bank
China is South Africas largest trading
paitnei with a suiplus in favoui of China
and the infusion of the Chinese yuan has
kept South Afiica aloat uuiing the eco
nomic iecession You can see why China
has a place of impoitance in South Afiicas
foieign policy
The Dalai Lama last visited South Africa
in a uecaue anu a half ago to meet
Nelson Nanuela The uenial of a visa to
Why is South Afiica a BRIC
~ Alisha Pinto
S
outh Africa is set to participate in the 4th BRICS summit in New Delhi, its 2nd since its mem-
bership last year. What does this mean for newest member of this grouping? Alisha Pinto,
Researcher at Gateway House, interviewed Renu Modi, Senior Lecturer at the Department of
African Studies, Mumbai University, on South Africa and its role in the BRICS.
12
South Afrlcu lx u purt of the BASIC group
comprlxlng emerglng countrlex oppoxeJ
to Wextern prexxure to unJertuke legul
emlxxlon obllgutlonx 0lven thut South
Afrlcu lx u polluter xlmllur to mlnlng
countrlex llke Auxtrullu unJ CunuJu
wlll lt be uble to mulntuln ltx poxltlon
wlth the BRICS ut the cllmute chunge ne
gotlutlonx
There is an unstated link between the de
bates on climate change and energy secu
iity of a countiy South Afiica is Afiicas
foiemost pollutei anu iepoiteuly its min
ing sector, mainly coal, contributes about
of the total gieenhouse gas emis
sions on the continent South Afiicas ex
cessive use of coal foi powei geneiation
anu piouuction of petiol by leauing public
sectoi companies questioneu its position
as a genuine biokei at the Becembei
0NFCCC climate change meeting
As a pait of the BASIC countiies South
Afiica stoou iim on the issue that uevel
opeu countiies shoulu beai the buiuen of
climate change, lead the emission cuts and
pioviue funus to the pioposeu uieen Cli
mate Funu anu technology to ueveloping
countiies foi bettei auaptation anu miti
gation of climate change All countiies
including South Africa, have been talking
about the use of renewable sources of en
eigy such as solai winu anu watei powei
but this has not been put into piactice Foi
a genuine commitment to the issue, there
has to be an acceptance of the piinciple of
Common but Biffeientiateu Responsibili
ty CBBR anu a stiong anu legally binuing
compliance pioceuuie in futuie climate
change negotiations
the Balai Lama to attenu Besmonu Tutus
th biithuay celebiations was not the
iist time he was uenieu a visa In he
was iefuseu a visa on the pietext that his
visit woulu uistiact fiom the Woilu
Cup piepaiations The Balai Lama is a vo
cal ciitic of Chinas uenial of the iight to
selfueteimination anu of human iights to
the Tibetans The iecent visa uenial was
ciiticizeu locally C0SAT0 the Coalition of
South Afiican Tiaue 0nions teimeu this
uecision an exchange of moiality foi yu
ans
This ueinitely shows that South Afiica
piioiitizes its economic ielations with
China anu suppoits the one China stance
that iejects political inuepenuence of Ti
bet The Zuma auministiation is moie
explicit about pieseiving South Afiicas
enhanced engagement with China, while
in the Nbeki peiiou the China factoi was
moie unueistateu
Where Joex South Afrlcu xtunJ ln the
ohu RounJx of the W1O negotlutlonx
Hux lt been xupportlng the emerglng
economlex ut the puxt meetlngx
At the iecent Bavos meeting in }anuaiy
South Afiica stoou alongsiue Biazil
India and China to issue a common dec
laiation anu ieafiimation that Boha Be
velopment Rounus must be baseu on the
piinciple of iecipiocity iequiiing pio
poitional commitments between uevelop
ing anu uevelopeu countiies At the coie
of the agreements would be the interest of
pooi people that can be ieau as the na
tional inteiests in theii iespective home
contexts So ceitainly South Afiica sup
poits the stance of the ueveloping coun
tiies
At the Doha negotiations, South Africa
and other emerging markets of the glob
al South are by and large on common
giounus Bowevei they uo uiffei in nego
tiations on issues of market access and the
neeu to piotect theii uomestic agiicultuial
anu inuustiial sectoi Beie they use uefen
sive stiategies against each othei as exem
pliieu by Biazil anu South Afiica which
guaiu against any injuiy causeu to theii
sensitive piouucts these countiies use im
poit piices anu quantity tiiggeis to piotect
the livelihoous at home Biazil challengeu
the imposition of high taiiffs on its poultiy
expoits amounting to peicent of South
Afiicas poultiy impoits Biazil uisagieeu
with the South African allegation that it
was uumping
From whlch BRIC countrlex Joex South
Afrlcu recelve u mujorlty of ltx forelgn
lnvextmentx unJ whut ure the xectorx
thut recelve hlgh levelx of xuch lnvext
ment
0f the BRIC countiies China is the top in
vestor in South Africa and the sectors that
receive high levels of investments are the
banking sectoi mining sectoi focusing
on chiome anu electionic goous assem
bly 0veiall South Afiica ianks seconu in
Chinas mining investment in Afiica be
hinu the Bemociatic Republic of Congo
six piojects China has expiesseu its ue
sire to diversify its investments into sec
tors such as information technology, bio
technology, human resources and other
inuustiy seivices
Renu Modi is a senior Lecturer and former Director of
the Centre for African Studies, University of Mumbai.
13
InuiaBiazil An Afiican collaboiation
~ Estefana Marchn
P
lenty of buzz suiiounus BRIC Biazil
Russia Inuia China investment in Af
iica Rightly so they aie spuiiing the ie
gions integiation into the global economy
as nevei befoie Nuch has been heaiu
about Chinas infiastiuctuiebuiluing in
Afiica anu its competitive euge in the iace
foi natuial iesouices But what aie the
two uemociacies within the giouping con
tiibuting to the Continent
0nable to compete with Chinas hefty
contributions, India and
Biazil see agiicultuie on
which twothiius of Afiica
uepenus foi its livelihoou
as theii compaiative au
vantage Both countiies
have had their own agri
cultuial Inuia Revolutions
anu aie among the woilus
top foou piouuceis Aftei
South Ameiica Afiica pos
sesses the largest share of
uncultivateu cioplanu in
the world a land ready
foi tiansfoimation Beie
Inuia anu Biazil aie pio
viuing impoitant input
in the form of affordable
seivices anu baulyneeueu
technical expeitise To
gether, their venture into
Afiicas agiicultuie sectoi can ieignite a
piimaiy engine foi giowth anu piove vital
to the iegions foou secuiity
Inuiviuually Inuia anu Biazil have levei
ageu theii stiengths in affoiuable lowtech
anu scientiic ieseaich to boost Afiicas
agiicultuial piouuctivity Inuia pioviues
what it calls Tiiple A auaptable appio
piiate anu affoiuable technologies anu
Biazil has launcheu ieseaich anu foou se
cuiity initiatives thioughout Afiica The
Inuian goveinments incieasing lines of
cieuit up to 0S billion now aie uiiv
ing investment such as a 0S million
loan to uevelop commeicial agiicultuie in
Sieiia Leone Thiough Embiapa its pio
neeiing ieseaich institute Biazil shaies
with several African countries the skills
that transformed its own dry savannah
into one of South Ameiicas most fertile
iegions
Combineu it seems to be just what Afiica
neeus In Senegal says Renu Noui piofes
soi of Afiica Stuuies at the 0niveisity of
Numbai lowcost iiiigation pumps pio
viueu by the Inuian iim Kiiloskai Biotheis
have boosteu iice piouuction anu alloweu
the largely agricultural na
tion to meet twice as much
of its uomestic uemanu
Simultaneously Embiapa
has paitneieu with Sen
egal, investing in technical
tiaining anu expeiiment
ing with iice vaiieties
This kind of interlocking
investment by India and
Biazil coulu be the new in
vestment mouel foi Afiica
Their investments could
not have come at a better
time Agiicultuial piouuc
tivity in Africa has been
ueclining just as tiauitional
souices of aiu have shiunk
Accoiuing to Robeit Paai
lbei piofessoi at Baivaiu Kenneuy School
the shaie of Woilu Bank loans that went to
agiicultuial uevelopment in Afiica fell fiom
to between anu 0S
agricultural assistance shifted away from
capacitybuiluing to foou aiu By the
0S was spenuing twice as much pioviuing
fiee foou to the iegion as it was on helping
Afiicans feeu themselves Such aiu has uone
little to encouiage Afiicas uevelopment oi
to mitigate wiuespieau malnutiition The
Foou anu Agiicultuie 0iganization iepoits
that of Afiicans iemain malnouiisheu
The global economic slowdown will surely
impact foou aiu
By joining forces
to bolster Africas
food security, In-
dia and Brazil have
the chance to break
ground on a tangible
South-South agenda
that could have a
far-reaching impact
on a matter of urgent
global concern.
14
Inuia anu Biazil can ill the investment voiu
To maximize the impact what is neeueu is
a foimalizeu InuiaBiazil Paitneiship foi
Afiicas foou secuiity Nemoianuums of
0nueistanuing can be exploieu jointly with
the Compiehensive Afiican Agiicultuie
Bevelopment Piogiamme the Afiicanleu
piogiamme foi impioving foou secuiity
and agriculture, or regional bodies like
the Southein Afiican Bevelopment Com
munity foi coopeiation appiopiiate to
speciic economic oi agiicultuial climates
This will enhance InuiaBiazil ielations
without hindering their individual efforts
in Afiica While Biazils topogiaphy anu
climate moie closely iesemble Afiicas In
uias agiicultuial ecosystem has many les
sons to offei The aveiage Inuian faim is
smallei than its Biazilian counteipait
ha veisus ha anu the sectoi employs
moie people in Inuia than it uoes in Bia
zil Inuias expeitise in small faim mech
anization anu its expeiience of empow
eiing women thiough micioinance anu
coopeiative enteipiises is highly ielevant
to Afiica as it uevelops its inuustiy Afii
can institutions will beneit fiom hosting
Inuian anu Biazilian scientists as well as
piivate anu social sectoi leaueis to shaie
theii knowhow
Institutional anu peopletopeople intei
actions also piesent an oppoitunity foi In
uia anu Biazil to builu mutual coniuence
at a time when their bilateral and global
inteiactions aie incieasing Inteinational
oiganizations 0SAIB anu otheis alieauy
collaboiate in Biazilianleu agiicultuial
piojects thioughout Afiica The Inuian
Council of Agricultural Research or the
foithcoming Inuian Agency foi Paitnei
ship in Bevelopment can step in
If the paitneiship woiks then Inuia anu
Biazil can extenu knowleugeshaiing on
agiicultuie anu foousecuiity piogiammes
to othei ueveloping countiies The Inuia
BiazilSouth Afiica tiilateial foium IBSA
can seive as a spiingboaiu foi gieatei
coopeiation
Inuia anu Biazils incieasing engagement
in Africa is a clear sign that both countries
are embracing their new roles as global
uiplomats Foi now collaboiation in Afii
cas agiicultuie is not a piioiity foi eithei
country, but should be seriously consid
eieu Policymakeis anu acauemics have
histoiically calleu this type of collaboia
tion SouthSouth coopeiation a teim
meant to distinguish the mutually ben
eicial inteiactions ueveloping nations can
have with one another versus the often
unfavoiable ielationships they have with
Westein poweis SouthSouth coopeiation
has long been a populai catchphiase with
in the Inuian anu Biazilian uiplomatic lexi
con, but is only now, with the emergence
of these countiies as economic poweis
that the expiession is beginning to caiiy
any ieal piomise By joining foices to bol
stei Afiicas foou secuiity Inuia anu Bia
zil have the chance to bieak giounu on a
tangible SouthSouth agenua that coulu
have a faiieaching impact on a mattei of
uigent global concein
Estefana Marchn is the head of Latin America Studies at Gateway House: Indian Council on Global Relations, Mumbai.
15
China anu Inuia Slowing giowth vs Stalling giowth
A
t iist glance its bau Supeistai Chi
nas giowth taiget is loweieu to
foi the yeai uown fiom pieviously but
shockingly lowei than the blisteiing
aveiage giowth China iackeu up ovei the
last two uecaues
Across the water, India is slowing to 6%,
well below the manuatoiy neeueu just
to cieate jobs in the foimal anu infoimal
economy foi ovei million new woikeis
each yeai This must be bau news foi In
uia China anu the woilu
But the two situations coulunt be moie
uiffeient Inuias slowuown is the iesult
of lack of economic reform, derelict infra
structure, archaic laws
anu asphyxiating giaft
Slowing to 6% is indeed
a dire outcome for In
uia The countiys baby
boomers are now bulg
ing ovei of the pop
ulation Anu they neeu
livelihoous
Chinas lowei giowth is
a managed target, set
expiessly by the Bei
jing leaueiship to cool
the economy from ris
ing inlation uelate a
real estate bubble and
most impoitantly uiiect giowth to Chi
nas home economy iathei than piimaiily
uiive giowth thiough expoits In othei
words, after three decades of automatic,
ontime uevelopment as a piouucei foi the
world, China is taking a breather because
it can affoiu a slowuown Its also politi
cally convential
A political backlash is giowing against
China in the 0niteu States anu Euiope foi
taking the Wests jobs Politicians bianu
China as a jobs vultuie Its a little late to
blame China but it pays politically In ie
sponse China is unfuiling a bannei that
says Rebalancing of its home economy
That may ieuuce piotectionist calls fiom
the 0S anu take the piessuie off China
to ievalue the yuan now about to the
uollai The iebalancing mantia also iecog
nizes that Chinas laigest maikets Euiope
anu the 0S may be on the slow giowth
tiack foi some yeais aheau
Inteinally China is accepting slowei
giowth foi its own inteiest China now
has to position itself to move fiom the
factoiy that it is to the seivice anu value
auueu China that its leaueiship set as the
goal in its last two iveyeai plans So fai
however, that transformation has not tak
en place China has not shown an ability
to ieoiient its economy in a valueauueu
new uiiection
The new policy iecognizes
the enu of an eia Foi the last
yeais China has been
leveiaging its population
uiviuenu the economic
piinciple that alloweu it to
transform millions of villag
eis into cheap woikeis foi
its expoit factoiies While
China can still piouuce will
ing woikeis fiom its West
ern states by building new
highways anu powei plants
most economists believe its
cheaplaboiuays aie ovei
But that may be just as well China will
have fewei jobs to ill than the million
it neeueu to cieate annually in the past
The average age of a Chinese worker is
anu it is expecteu that some mil
lion employees will stait leaving the woik
foice in ive yeais giauually tuining Chi
na into the woilus laigest aging society
China will need to increase social welfare
spenuing anu keep iaising the minimum
wage which will put moie money in the
pockets of Chinese consumeis The ben
eit fiom this shoulu be a biggei consumei
maiket
Contrast that with India, where the aver
age woikeis age is anu some mil
lion aie unuei Inuia inheiits the popu
The India-China slow-
growth story isnt
about trading places.
For China, it is a strat-
egy. For India, it is
stalling out. All this
suggests the time for
India to act is now.
~ Manjeet Kripalani and Bob Dowling
16
lation uiviuenu but beneits only if it can
cieate useful jobs foi its new young woik
eis To uo that it neeus to iamp up giowth
in the to iange That is uoable ai
gues Belhi economist Suijit Bhalla who
thinks Inuia can ciuise along at while
still keeping inlation in check Inlation
in }anuaiy was but the longteim
iate has aveiageu neaily a huge bui
den when it hits basic fuel and food for the
pooi
So the InuiaChina slowgiowth stoiy
isnt about tiauing places Foi China it is
a stiategy Foi Inuia it is stalling out All
this suggests the time for India to act is
now Inuia has no capacity to become a
factoiy expoit machine noi uoes it neces
saiily have to Its uomestic economy is so
laige anu unueiseiveu theies plenty to
go aiounu at home alone }ust of In
uia is manufactuiing anu as a uemociacy
it has a manuate to tiy anu spieau social
anu economic uplift foi all its people
But the old adage about China having to
peuule its bicycle at oi fall off isnt iel
evant to China anymoie Insteau that is
the giowth analogy foi Inuia Inuia cant
afford to slack off, nor can it afford mas
sive goveinment spenuing to keep the
bike upiight Inuia has to cleai the acies
of iegulatoiy biush anu tax tiaps out of its
path China with tiillion of cash ie
serves on its books can take a break, sit
back like a fat cat banker and watch the
show
Bob Dowling is an Editorial Advisor to Gateway House: Indian Council on Global Relations, and Manjeet Kripalani
is Executive Director of Gateway House.

Bewaie of cheap lenuing fiom China

~ Samir N. Kapadia
E
veiyones taking Beijings money but at
what cost
With ovei tiillion in foieign cuiiency
ieseives China has a lot to invest In au
uition to spenuing acioss asset classes of
fering attractive loans has been a growing
pait of Chinas economic stiategy Chinas
fellow BRIC paitneis Russia Biazil anu
Inuia have beneiteu fiom this laigesse
As emerging market economies, all three
countiies uespeiately iequiie the cash to
break ground on massive infrastructure
piojects BRIC nations along with South
Afiica aie ieveiwing a plan to ieceive ien
minbi loans fiom the China Bevelopment
Bank Befoie they meet
in New Belhi on Naich
In that light its impoitant
to iemembei that Chinas
loans come with strings
attacheu
India has much to consid
ei Recently China maue
news by lending money
to Anil Ambanis Reliance
Communications, for the
seconu time The Reseive
Bank of India last month
appioveu a ieinancing of
foreign currency convert
ible bonus woith
billion dollars by a con
soitium of Chinese banks foi the piomi
nent Inuian inuustiialist It was the laig
est ieinancing of its kinu foi an Inuian
company The sevenyeai loan was offeieu
at a inteiest iate In Ambani also
neeueu cash billion to help inance
his u telecommunications infiastiuctuie
foi Reliance Communications Recoiueu
as the laigest inancing in the histoiy of
Inuias telecom sectoi the loan was un
ueiwiitten by the China Bevelopment
Bank Reliance saiu the aveiage piojecteu
interest cost savings on the loan are val
ueu at million a yeai
As pait of the billion loan agiee
ment Reliance woulu impoit a pait of
its telecommunications equipment fiom
Chinese venuois namely Buawei Tech
nologies Buawei a quasigoveinment
company paitially owneu by the Peoples
Libeiation Aimy has since investeu
million in another Indian telecommunica
tions company 0nitech Wiieless a majoi
competitoi of Ambanis Reliance The loan
openeu the uooi foi China to entei one In
uias laigest maikets which is key since
the Indian government had been working
to keep Chinese companies out
While Inuias megacompanies aie only
expeiiencing the beginning of Beijings
accommouating bank policy Biazil anu
Russia seem to have grown accustomed
to taking Chinese money with conuitions
In Russian oil anu
pipeline giants Rosneft
and Transeft, took a com
bined loan of $25 billion
from the China Devel
opment Bank The loan
was neeueu to inance
a massive pioject that
woulu supply China
million tons of oil a year,
oi baiiels a uay
ovei yeais With
billion, Transneft was
able to inish constiucting
Russias iist pipeline to
Asia linking the Feueia
tion to China anu the Pa
ciic With the iemaining
billion Rosneft launcheu its vankoi
ielu in eastein Sibeiia the laigest inu
biought into piouuction in Russia in the
last yeais Touay Rosneft is paying
about 4% in interest, based on a margin
of ovei a six month aveiageu LI
B0R iate With LIB0R at histoiic lows the
terms of the loan agreement remain at
tiactive foi Russian companies
The pipeline was completeu on }anuaiy
but the cost pei baiiel has been
unuei uispute between the two countiies
Last month Rosneft appioveu changes in
the existing agieement that peimitteu a
baiiel uiscount on ciuue shipments
offeieu to China National Petioleum Coip
the beneiciaiy of the supply contiact The
Russians will absorb a discount of $3 bil
As the banker to the
emerging world, China
has the ability to use
cheap loans as lever-
age. But what China
conceJes on inoncinq
it can recover on the
supply agreement.

lion in aggregate revenue over the course

of yeais oi a uay The initial
capital investment thus seiveu as a bai
gaining chip foi the Chinese in the boaiu
ioom
Biazil is heaueu uown the same path In
Biazilian oil giant Petiobias ac
cepteu a billion uollai loan fiom the
China Bevelopment Bank ovei yeais
The inancing also tackeu on an expoit
agieement calling foi baiiels of
oil supply a uay foi the iist yeai followeu
by baiiels of oil supply a uay foi
the iemaining nine The teims of the loan
weie also attiactive foi the Biazilians
Petiobias then CE0 }ose Segiio uabii
elli stateu that the loans inteiest iate at
less than offeieu bettei teims than
anything the company hau seen befoie
By offeiing the oil as collateial as opposeu
to being a pait of a secuiitization stiuc
tuie Petiobias makes the loan payments
piimaiily fiom its oil sales 0ne question
is whethei Petiobias will be askeu to uis
count the oil piice as Russia uiu foi Chi
na By piiming the pump with inancing
China has demonstrated how it can lock
up supply in a stiaight piocuiement con
tact avoiuing the commitment of an eq
uity stake that it useu in othei Biazilian
eneigy ueals
In the Biazilian iion oie giant vale
signeu a billion loan agieement to
constiuct Chinamax shipping vessels
each with a ton caiiying capac
ity foi iion oie vale hau the ships manu
factured in China to create some goodwill,
thinking the Chinese would then allow the
Biazilian company to ship laige quantities
of iion oie to Chinese poits in its own ves
sels But the plan backiieu 0n hei maiu
en voyage in }une last yeai vales iist Chi
namax vessel was baiieu fiom anchoiing
at the Balian poit Facing a backlash fiom
uomestic shipping companies the Chinese
goveinment banneu vales ships fiom any
poit of entiy in China Aftei months of
uispute paiticulaily fiom Chinas state
owneu shipping company C0SC0 Beijing
alloweu the ships to unloau oie
If theies a lesson heie it may be not to
expect the Chinese to make concessions
on the deals that they make with BRICS
paitneis When China inances a pipeline
it may uemanu a lowei piice on the oil ue
liveieu If you use Chinese yaius to builu
youi ships it may ban youi ships
Chinas use of powei thiough stateowneu
companies like C0SC0 is exactly what In
uia has to watch out foi Inuia has to be
especially caieful with loan iepayment
plans that iely on assumeu business with
China That inteiuepenuency can put com
panies anu theii shaieholueis at iisk In
dia has to also beware of seeking loans at
the last minute Reliance tieu up ieinanc
ing on its bonus just six weeks befoie the
ieuemption uate With uistiesseu King
ishei Aii looking foi money will China
become the bailout bank foi stiappeu In
uian coipoiates
All countiies piactice shaip baigaining
As the banker to the emerging world,
China has the ability to use cheap loans
as leveiage But what China conceues on
inancing it can iecovei on the supply
agieement This quiu pio quo then be
comes moie of an implicit guaiantee foi
favoiable supply teims anu access to mai
kets Because of these tacit obligations
Inuia neeus to look behinu the veil Biazil
buineu by its expeiience is now stacking
up the biicks against China with policies
to foiestall fuithei inluence
Biazils iuue awakening has maue it moie
piotectionist To cuib uamage to uomes
tic manufacturers, the government raised
taxes by on all cais with a high pio
poition of foieignmaue paits Biazil has
also put iestiictions on foieign lanu own
eiship anu in the case of Petiobias maue
it the sole opeiatoi of oil ielus wheie li
censes havent yet been auctioneu Petio
bias Reining Biiectoi Paulo Robeito
Costa saiu the iegulation iepiesents a
stiong position of the state to keep this
wealth insuiing Biazil iemains the
piime custouian of its eneigy iesouices
Biazilian steps aie all seen as ways foi the
nation to piotect itself fiom Chinese inlu
ence in industries such as manufacturing,
agiicultuie anu oil
In a twoyeai winuow of China
has expenueu some billion in Biazil
thiough loans anu investments up fiom
million the yeai eailiei While the iate
of Chinese investment has been signii
cantly highei in Biazil the Biazilian gov
einments new BRICSlaying policy may
be what Russia and India should be con
siueiing as they tap Chinas eveilowing
iivei of money
Samir N. Kapadia is a Geoeconomics researcher at Gateway House: Indian Council on Global Relations, based
out of Mumbai, India.

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