Emerging countries are at the center of the economy

Emerging countries are at the center of the economy

Marcus Trejo. Photo: Gabriella Bello

A little over a year ago, Marc Trogo He took over the management of the BRICS Bank (NDB), which was created in 2014. “When we got here, only 10% of projects were approved in Brazil. Now it is 20% ”, says the former Minister of Foreign Trade, who lives in Shanghai.

Speaking last week with The Column, straight from the fastest growing city in China, the emerging economies specialist was quite optimistic about the country’s import and export prospects. Here is the interview:

The international scene looks very turbulent. However, do you see opportunities for Brazil?

Certainly. There are countless favorable points in a country with the characteristics of Brazil. Perhaps the most important phenomenon of our time that will have an impact over the next fifty years is the rebalancing of global economic axes. Henceforth, the Group of Seven (the United States, Japan, Germany, France, the United Kingdom, Italy, and Canada) will have relatively less economic weight than what I like to call the E7 (China, India, Russia, Brazil, Indonesia, Mexico and Turkey), a group of the seven largest emerging economies.

Was there a leak for the kids?

We are eyewitnesses to an interesting eclipse. More mature economies remain extremely important. However, when measured by purchasing power parity, the G7 is expected to close in 2021 at $42 trillion. The GDP of E7 will be $53 trillion.

But isn’t it because of the China factor, which has a much higher GDP than other emerging countries?

Let’s get rid of China and America. The GDP of E6 is greater than the GDP of the G6 group. These new realities of the emerging world are here to stay. Demographics and the scope and speed of growth make a big difference.

What does this mean for Brazil?

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Huge new trade and investment flows. This is already evident in the trade balance. In 2021, Brazil’s trade flow should be half a trillion dollars, the largest in history. In the past 12 months, Brazil has exported more to Asia (even excluding China and Japan) than it does to the European Union. In 2021, Brazil will have the largest trade surplus in history.

Much of this result is due to emerging markets?

certainly. The comparisons are impressive. Today, Brazil exports more to Singapore than it exports to Germany. For South Korea more than for Spain. For Malaysia more than for Italy and for India more than for the UK. More for Thailand than France. More for Bangladesh than Australia, Denmark, Finland, Austria and Israel combined.

But the most impressive thing is the trade with China, right?

Yes, the relationship with China is a good example. In 2001, trade between Brazil and China amounted to one billion dollars a year. Today it is worth a billion dollars every 60 hours. Over the next ten years, China is expected to import a total of $25 trillion. Since Brazil accounts for 4% of everything that China buys from the world, if we kept our share, our exports to China would be $100 billion annually. This represents, in 20 months, an amount equivalent to what Brazil will save through pension reform in 10 years.

Should this trend continue as exports to emerging markets grow?

Should, yes. Brazil must make the most of this. Highly populated countries such as India, Indonesia, Bangladesh, Pakistan, Vietnam and Egypt are expected to experience robust growth. Only here we are talking about two billion people. When GDP increases by 7% per year, it practically doubles every decade. These countries still have relatively low income levels. With exponential growth, a large portion of the additional income goes to basic consumption and infrastructure work. This means that Brazil can take advantage of its comparative advantages as a major power in agribusiness and in the trade of mineral products. Thus, along with the result of structural reforms comes an essential part of the investment that Brazil must make in infrastructure and the re-industrialization of Economy 4.0.

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Today you are the director of the NDB (BRICS Bank). What is the focus now?

Our mission at the National Development Bank is to mobilize resources for infrastructure and sustainable development in the BRICS countries and other emerging economies. Since its establishment in 2015, the National Development Bank has approved 80 projects. The portfolio is currently valued at R$160 billion. They finance transportation, water and sanitation, clean energy, social infrastructure, roads and railways. We join the current efforts of other multilateral institutions such as the World Bank. Our strategic goal is to position ourselves as a reference for emerging economies.

What is the importance of the Bank for Brazil?

In the National Development Bank, in percentage terms, Brazil has the largest share. In the World Bank, for example, Brazil is a minority partner and owns just over 2% of the shares. In the National Development Bank, Brazil owns 20%, in addition to the other partners. Brazil and other BRICS countries are part of the Bank’s capital. Every day we meet with the world’s largest emerging economies and work in areas such as infrastructure, where our interests align. In addition, we are a bank dedicated to fulfilling orders. This means that the projects financed by the country’s National Development Bank are those that Brazil itself refers to as priorities. Our presence increases the supply of long-term capital available to Brazil.

And did you manage to do that?

Yes, only for Brazil, since its founding six years ago, the National Bank for Economic and Social Development has already approved 27 billion R$. For example, we helped fund the Pirapora complex in northern Minas Gerais, the largest solar plant in Latin America. It produces enough energy to consume 420,000 families. We invest in wind power plants in Bahia, Pernambuco and Piauí, which supply 570,000 homes. At Bara, we support sanitation and sewage projects. In Rio de Janeiro, we help reduce the environmental impact of effluent emissions. In Parana, we are based in the modernization of BRT Curitiba. In other words, there is a very important presence in Brazil. However, NDB is still unknown.

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What have you achieved in a little over a year playing in the bank?

We created an area in the National Development Bank dedicated exclusively to the private sector. We created a dedicated division called “ESG”, created a talent management division and balanced the geographical distribution of funding. When we got here, Brazil represented only 10% of approved projects. It’s now 20%.

What awaits us?

With the mandate of our member states, we have started negotiations to enter into new partners, which we shall announce soon. Today we have $5 billion in loan guarantees for small businesses. And also about R$12 billion for sustainable infrastructure and climate, which can be used by state and municipal governments and the private sector, all in so-called green growth. There are 17 billion riyals ready for disbursement. Another 5 billion riyals for infrastructure must be approved in the next 12 months.

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About the Author: Camelia Kirk

"Friendly zombie guru. Avid pop culture scholar. Freelance travel geek. Wannabe troublemaker. Coffee specialist."

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