Brazil insists on more voting power before raising IMF contribution

BRAZIL has raised the stakes ahead of next week’s Group of 20 (G-20) summit, by saying it may cap its contribution to a planned funding increase for the International Monetary Fund (IMF) unless there are firm promises to give emerging markets more say at the international table.

While summit host Mexico urged Europe to quickly finalise details of aid for Spain’s banks, Brazil said on Tuesday it might contribute less than it had planned to the extra $430bn promised to the IMF by member states in April to help fund heavily indebted euro-zone countries.

The euro-zone debt crisis is set to dominate the G-20 leaders’ meeting in Los Cabos next Monday and Tuesday, as it did the last summit in Cannes, France, six months ago. The meeting starts a day after Greek elections which could decide whether the country stays in the euro zone.

The G-20, created in 1999 after the Asian financial crisis as a way to forge stronger links between developed and emerging economies, was promoted to be the number one global policy-making body after the 2008 crisis but its authority has been undermined since as countries pursued their own domestic agendas.

Brazil made it clear it would use the meeting to insist on more say at the IMF. Voting power at the IMF is dominated by the US and other developed powers.

“We are frustrated because we see that countries that know they will lose influence are resisting the (quota) formula,” said a top Brazilian government official, who declined to be named. “The amount of additional resources remains open. It could be more than $10bn or less.”

India, Russia and China agree with Brazil’s position in principle but have not yet decided whether to adopt this as a formal negotiating stance at the G-20 summit, two Indian government officials involved in preparations said.

The European Union has said it would reduce the number of seats it holds on the IMF board by two later this year, but G-20 sources who spoke to Reuters on condition of anonymity were pessimistic about a firm agreement by then.

China, India, Russia and Mexico are among countries yet to say how much they will commit to the IMF, although final pledges are due at the Los Cabos summit.

A European source said countries were waiting to see how much China would contribute and on what conditions. China is said to be considering a $60bn pledge.

One of the Indian officials said that China would pledge $45bn$50bn to IMF funding and Brazil, Russia and India $10bn-$15bn each, if they come to a consensus on making contributions.

The Brics countries of Brazil, China, India, Russia and SA were due to meet on June 18, the Brazilian official said.

The IMF reform package will not be finalised until the US Congress approves the move, something that is highly unlikely ahead of November elections because it would require the authorisation of additional funding for the IMF.

Although markets are sceptical about the deal by euro-zone finance ministers last Saturday to lend Spain up to €100bn to recapitalise its banks, Mexican President Felipe Calderon said the move could mark an important step towards resolving the region’s debt crisis.

“The decisions which were announced at the weekend … really do open the door to finding a solution to the case of Spain and at the same time making an enormous step towards resolving Europe’s economic problems,” Mr Calderon said. “I would argue for these proposals to be firmed up quickly.”

He said the leaders aimed to come up with a Cannes-style action plan to support global growth.

“(The action plan) will not only include measures to confront and resolve the European crisis, which is ultimately an economic crisis, but will also put forward concrete measures on public policy in key areas in the realms of tax, finance and monetary policy, which will help to boost global growth in the long term,” he said. Reuters