Dilma Vana Rousseff

Since this Forum was established in 2012, the world has undergone significant transformations. The central theme of this meeting, “Stabilizing an Unstable World through Consensus and Cooperation,” is most timely. Consensus and cooperation are guiding principles that we need to follow urgently and systematically if we are to confront the serious, unstable, and disruptive times the world is experiencing. We are facing a serious climate crisis, a sharp increase in inequality, low growth, protectionism that fragments global value chains, and geopolitical conflicts. It is a superposition of crises, with insecurity and instability having become the rule rather than the exception.  
 
The financial neoliberalism practiced in developed countries has caused credit and finance to become “headwinds” rather than drivers for the productive economy; they have become real hindrances and the center of unbridled speculation that sucks all resources dry. Thus, a growing concentration of income and wealth in the hands of very few in the Global North has brutally increased inequalities, while simultaneously also creating more inequality, speculation, instability, and successive crises in the Global South.
Weak regulation of international finance has failed to prevent recurring crises linked to the financialization of Western economies from happening. The regulatory measures recommended by the G20 have not been able, in fact, to prevent the occurrence of either new speculative bubbles or excess liquidity problems and high leverage that have led to new bank failures.
 
The globalization trend that promoted more internationalized markets, trade, industrial production, services, currency flows, bonds and shares, as well as information—has been receding ever since the 2008/2009 global financial crisis. Before the crisis, Global Value Chains—one of the pillars of globalization—were growing at a faster rate than other components of GDP but have since slowed down. This downturn was followed by a rapid recovery in 2010-2011 and since then, with the exception of 2017, global value chains have been growing at a slower rate than global GDP.
 
This slowdown of globalization has resulted in lower economic growth and fragility in global value chains—further deepened by the pandemic. Protectionism, decoupling and de-risking policies, and sanctions have acted to intensify these already serious fractures inherited from the great financial crisis.
 
More recently, the weaponization of the US dollar and sanctions in geopolitical conflicts has raised the price of food and energy, further fragmenting supply chains. Blocking the access of sovereign nations to their own international reserves, as well as other practices based on the unacceptable notion of extraterritorial jurisdiction, have created an environment of distrust regarding the safety of assets kept in Western financial institutions.  
 
The quest for solutions to these serious problems can only be successful if based on the principles of consensus-building and of international cooperation. Failure to observe these principles, as we witness today, results in deep flaws in international governance.  
 
The United Nations has not been able to cope with the growing geopolitical tensions, nor have the so-called Bretton Woods institutions—the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO)—shown they are capable of reversing the trends of geo-economic fragmentation and of growing social fragility.
 
Another clear symptom of the lack of coordination in international governance is the alarming fact that the climate crisis and the UN’s 17 Sustainable Development Goals are not being addressed in accordance with the decisions taken at all the UN Conferences of the Parties (COPs) and other international environmental forums that have taken place in the last decade. The capital contributions to developing countries that the rich countries had pledged to make since the COP15, the Agenda 2030, which defined the Sustainable Development Goals, and even in the Paris Agreement, have never materialized.
 
At the same time, macroeconomic uncertainty prevails at a global level on account of the effects of high inflation and of monetary policies that drive interest rates upwards, giving rise to bank failures and excessive leverage. The end of quantitative easing and the adoption of quantitative tightening also contribute to increase the risk of recession in developed countries and to intensify the volatility of credit, currency and capital markets.
 
For their part, developing countries have generally suffered the effects of interest rate increases and exchange-rate devaluation. The high indebtedness of these countries, caused largely by neoliberal austerity policies, is now maximized by the stratospheric impact of the strong dollar exchange-rate policy, as well as of the inflationary spiral, on their external debts, with many reaching the threshold of default.
 
To cope with this disquieting situation, a whole new level of political and institutional engineering becomes urgent and indispensable if we truly are to promote inclusive and sustainable development in an environment of common prosperity and peace for all peoples and countries. Without inclusive and sustainable development there is no peace. Without peace there is no stability and security.
 
The concepts of cooperation and consensus are opposed to the rhetoric of narratives that seek to impose a sectarian vision of civilization, development, human rights, and democracy. Political models derived from the experience of a single country have been elevated to the condition of the only acceptable standard for the entire world, a standard whose adoption is mandatory lest those values are imposed through traditional warfare, coups d’état, or blockades and sanctions. The rich diversity of human civilizations is thus summarily dismissed, and the different development paths and models pursued by the different nations are, from this point of view, disregarded. It is an attempt to impose a single path for development and a single vision of democracy—in its neoliberal version, which is at the root of the proliferation of fascist regimes.
 
Rather than mere objective phenomena that weaken the patterns of globalized economic and financial relations, notions such as “decoupling” and “de-risking” are indeed political weapons used to curtail the rise of new players in the international arena. The very dynamics of globalization, although currently weaker, has given rise to a deep interdependence among economies and regions of the world, an interconnection that has grown in tandem with the increase in international trade, the greater density of global value chains, and the multiplication of capital flows. Disconnecting the world has thus become unworkable, and any attempts to erect insurmountable barriers between countries is nothing but an extemporaneous return to the Iron Curtain.
 
Here’s when dichotomies arise, and all countries are confronted with a choice: polarization or common prosperity? Cold war mentality or multilateralism? Copying other countries’ development models or building one’s own paths in light of each nation’s conditions? Fighting climate change with meaningful injections of new money or simply leaving things as they are?
 
One of today’s most serious threats is a new form of protectionism: the containment of development in emerging countries. This is the case of containment policies directed at China, whether through unilateral tariff increase policies, which demoralized the WTO, or the recent “Chips and Science Act” of August 2022, which blocked the global production chain of semiconductors. These rifts in the previous pattern of globalization require reforms in global governance in order to break with protectionist unilateralism.  
 
Therefore, it is imperative that we seek a consensus based on the principle of shared prosperity, by which all countries stand to gain from the wealth generated globally, one that is associated with the rejection of the unipolar model under all its forms. There is no possibility of shared prosperity where sanctions, attempts to contain emerging countries, financial and technological trade blocks prevail.
 
What is at issue today is the “exorbitant privilege” itself, an expression coined by De Gaulle’s Minister of Finance to define the position acquired by the US dollar. The fact that for many decades the world has accepted the existence of a single international reserve currency has given rise to an asymmetric financial system that has always generated great advantages for the country issuing that currency. Besides the fact that US companies are by definition protected from exchange-rate risk, which is not the case with their competitors in other countries, there are the huge seigniorage gains of the dollar, derived from the fact that others are forced to sell goods and services in order to obtain dollars while Americans obtain them simply by printing money. Even more important is the privilege of financing the US public deficit by all international economic agents who need to have dollar-denominated assets which are recycled and kept in US and international financial institutions, under the strict regulatory control of the Fed. The abuse of this last privilege, enacted through the sequestration of sovereign international reserves under the name of financial sanctions, has given rise to questions worldwide concerning the inherent arbitrariness of the global monetary order.
 
What is clear is that, in the long run, the overall geostrategic position of the US relative to emerging powers will be of key importance to the global monetary system, as it was also the case with previous hegemonic currencies. While US domestic policy, as well as the evolution of its international alliances, are determinants of its position in the geopolitical sphere, this position will ultimately depend on the success of the American economy, as a whole. Put simply, the question is whether the US economy can maintain its leading position as a driver of innovation. That is the underlying reason for the policies of containment of emerging powers, as it was once done with Japan and is now being attempted with China.
 
 As always, past performance is not an indicator of future success. Everything indicates, however, that two scenarios are clearly unlikely: on the one hand, the emergence of an alternative hegemonic currency, that is, the replacement of the dollar-based monetary system by another centric currency in its stead. On the other hand, the creation of a global currency, as Keynes wanted. Because then, as now, the necessary condition to sustain such a currency, that is, global geopolitical unity, does not exist.  
 
In the absence of a complete replacement of the dollar as the leading currency, and without the emergence of a single global currency, the most likely outcome is the constitution of a new monetary system, better adapted and more multipolar, resulting from three factors. First, from the steady tendency towards growing bilateral trade, which gives rise to increasing returns of scale in the use of their respective currencies, to the detriment of those obtained with the dollar. Second, from the deepening of local capital markets in emerging economies. And finally, from the many efforts on the part of these countries to establish insurance schemes against exchange-rate crises in their balance of payments, similar to the Contingent Reserve Agreement (CRA) that was designed by the BRICS countries—sometimes resorting to simpler mechanisms, such as local-currency swaps.
 
In short, the intensification of bilateral trade between countries and the returns to scale generated from it can reduce the transaction costs between the buyer’s and seller’s currency, as well as protect against shocks arising from interest rate and exchange-rate fluctuations. Data published by the Bank for International Settlements (BIS) show a continuing growth in foreign trade in currencies of emerging economies and, they say, is also largely the result of significant transactions with emerging economy assets in capital markets. In any case, the growing participation in global trade and capital market transactions involving emerging economies suggests that the dominance of the dollar will diminish further, making the global monetary system more diverse and multipolar, with the currencies of major developing countries gaining in importance.
 
On the issue of the environment, as a result of the severe social and natural challenges of the current century, economic development must be always viewed as sustainable development. This means development that depends critically on a healthy environment and on a society built on a foundation of equality.  
 
This was the vision set out in all the landmark international agreements on the subject, starting with the Rio 20 Declaration, and then going on to the Paris Agreement, the UN Agenda 2030, and the UN Convention on Biological Diversity.
 
But it is not enough to simply say these words. We must come up with a concrete blueprint for facing up to our realities. We must propose and implement financial mechanisms and business models that generate employment and income, while conserving a natural capital base—namely soil, water, climate, forests, biodiversity, and oceans. The preservation of this base is essential so that we can sustain the economic process itself.
 
This is why it is urgent that we rescue the 2030 Agenda for Sustainable Development and its 17 Goals. They express a vision of the future and a plan of action in favor of people and of the planet. The eradication of poverty in all its forms and dimensions is pointed out as the greatest global challenge and as an indispensable requirement for sustainable development.  
 
However, we currently face an estimated total deficit of US$ 4.3 trillion in the availability of the resources needed to achieve the SDGs by 2030, according to the OECD. The enormity of this gap has led UN Secretary-General Antonio Guterres to call it “a financing black hole”—and rightly so.
 
Multilateral development banks (MDBs) have an important role to play in financing development and can help low- and middle-income countries to achieve their climate change targets and the SDGs. However, these banks play only a supplementary role, and it is not possible to transfer over to them the responsibility to provide the resources for climate adaptation and mitigation that had been assumed by the rich countries and that, so far, has not been fulfilled.  
 
It is inconsistent for the US and the EU to claim that it is necessary to the debts of developing countries while systematically increasing interest rates and supporting IMF austerity policies. It is inconsistent to advocate for an increase in the capital leverage of MDBs and for more concessional lending, while all continuing to accept that credit-rating agencies punish MDBs implementing such measures with downgrades and consequently higher interest rates. Therefore, it is important that we should promote a more comprehensive discussion on the Capital Adequacy Framework (CAF) proposed by the G20 and its true impacts both on financing the SDGs and on fighting climate change, and on preserving the financial health of MDBs.
 
The fact is that, in 2023, we are already three years behind the date to start mobilizing US$ 100 billion a year in climate adaptation and alleviation funds for developing countries, as agreed in Copenhagen in 2015. Some reports even claim that the actual aid provided so far is less than the published figures, and mainly translates into debt that must be repaid.  
 
However, it is not credible to imagine that the enormous costs associated with climate change adaptation and alleviation, as well as with the eradication poverty, can be met mainly through costly bank loans, since these are, by their very nature, only a supplementary source of funds. In view of the principle of common but differentiated responsibilities, as defined by the Kyoto protocol, and considering the much larger responsibility of developed countries in causing climate change, it becomes clear that only high-income countries that do not have to bear the burden of unpayable external debt can use loans as a major source of funds. Many developing countries cannot.
 
With its commitment to “leave no one behind,” the 2030 Agenda reminds us that bold, transformative steps need to be taken urgently to put the world back on the path to sustainability, resilience, and inequality reduction. Neither the SDGs nor the fight against climate change can be achieved without new money being brought to the table. Putting new names on existing programs and budgets simply will not do from now on.  
 
The poorest countries need to be given new resources to achieve the SDGs in a way that does not plunge them further into debt. Similarly, resources for climate change adaptation and alleviation must be made available while respecting the free exercise by developing countries of full and permanent national sovereignty over all their wealth, their natural resources, and their level of economic activity. Therefore, it is imperative to build an effective consensus and to adopt a new posture of close cooperation between rich and poor countries to face these serious problems.
 
A multipolar system is indispensable. For emerging economies, it is about overcoming the condition of mere commodity providers. The Global South, and Latin America in particular, must seek a reindustrialization with new characteristics. Many countries have not even reached the third industrial and technological revolution. And now, facing the fourth revolution, they are threatened to become mere consumers of platform capitalism products, only using digital applications in their economies. Digital integration and multilateral platforms such as the BRICS Bank, the African Development Bank, the Asian Investment and Infrastructure Bank, and the Andean Development Corporation (CAF) are strategic in promoting this new, more balanced multipolar order.  
 
To enrich the debate around these issues it is necessary to use a fundamental concept and principle: the principle is that of promoting development for the benefit of all, reducing unequal development between countries and within each country. The concept is that this quest must be based on the respect for each country’s history, as well as to their different political traditions and social systems.
 
The issue of financing economic and social development urgently demands structural changes in the international financial architecture that will make it possible to channel the available liquidity in such a way as to enable financing both on the scale and under the conditions required by developing countries and emerging economies.
 
Consensus-building and intense cooperation must be used to improve environmental governance instruments greatly, steering green financing mechanisms towards a truly multilateral mode of operation. Increased investment in research and dissemination of sustainable energy generation technologies for the global south is also needed to drive the transition to a low-carbon economy.
 
Improving international governance is at the foundation of building a shared prosperity for all. We must improve existing institutions and, when necessary, create new ones that are more effective and resilient, and that function in a truly multilateral and multipolar manner.  
 
For all these reasons, it is essential to ensure an effective arbitration power to the United Nations system. Simply put, the decisions of the UN General Assembly need to be considered by the entire international community. The purposes and principles of the UN Charter must be respected; the decisions of its institutions such as the General Assembly, the WTO and the World Health Organization (WHO) must be readily implemented. This is the only way for the voices and the rights of the majority of humankind to be heeded—and, besides prosperity and inclusion, this is the other indispensable foundation of peace.