Rousseff also wants an expanded role for Brazil within the IMF, along with the other BRICS, mainly through increased quota shares and voting rights. She has joined her colleagues from China, India, Russia, and South Africa in emphasizing that the IMF needs to recognize the importance of the world's largest emerging economies and allow for opinions and recommendations from nations that have overcome their economic hurdles and that more accurately represent the developing world.
Despite the IMF Governing Board's agreement in 2008 to increase the BRICS' quota and vote shares, and despite the Board deciding to shift more than 6 percent of the quota shares to them and other nations last December, these recommendations have yet to be officially adopted and ratified into the Articles of Agreement. What's more, analysts and the BRICS believe that these changes are insufficient, especially in light of the US and Europe's substantially higher quota shares, voting rights, and the BRICS' growing importance to the global economy. Mantegna and Rousseff hope that the Euro crisis will be an opportunity to address this imbalance.
Europe's crisis has also accelerated the shifting power dynamics between Brazil and its former colonial power, heavily indebted Portugal. Rousseff has not only proposed to buy Portuguese treasury bonds, but she has also considered the possibility of early buybacks of Brazilian bonds held by the Portuguese government, which would help reduce Portugal's debt by retiring bonds at a discount while stabilizing the bond market. While Mantega has expressed his reservations, given Portugal's potential inability to repay and the legal limitations on using Brazil's foreign reserves for buying debt, Rousseff still seems firmly committed to these options, stating that she will do "everything to help" and pledging to lend a hand. Rousseff views Portugal's recession as an opportunity to strengthen bilateral political and economic ties, helping overturn years of jealousy and envy over Brazil's success. And she has often invoked simple gratitude as a motive, referring to Portugal's past assistance in Brazil's time of economic crisis.
But cultural affinity and altruism can only explain so much. Several Brazilian companies have invested in Portugal in recent years, with a total investment of $ 65 million in 2008, increasing to $ 310 million in 2009. Rumor has it that Petrobras, Brazil's state-owned oil company, is planning to purchase 33 percent of Galp, Portugal's leading petroleum company. Portuguese businesses have also invested heavily in Brazil. And in January 2011, Portugal's Telecom acquired 25 percent of Brazil's biggest land-line phone company, Oi, for $5 billion. Last year overall, Portugal's investments ranged from the energy sector, to tourism and construction, tallying approximately 25 billion euros.
Of
course, engaging with Europe carries risks at a time when Brazil's own economic
future -- generally attributed to high tax rates, inflation, an overvalued
currency, and high public sector deficits -- isn't exactly guaranteed. The
government projects
the country's economic growth will not exceed 3.4 percent this year -- it was
2.7 percent last year, down from 7.5 percent in 2010 -- so Brasilia may not
have very much cash to spare come 2013.
Despite these economic risks, Rousseff's European strategy is a smart move. By providing financial support in time of need, Brazil can strengthen its partnership and economic relationship with several European countries, as well as with the IMF. And by lending a hand, Rousseff may be able to garner more European support as she strives to boost Brazil's influence within the U.N. system and the IMF. Through these calculated endeavors, Rousseff can signal that Brazil isn't just arriving on the international scene, it's here to stay.
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