Brazil evaluates leaving multilateral economy agencies for lack of money

The Ministry of Economy defends the review of Brazil’s participation in different international organizations. The lack of money is the justification for Paulo Guedes’ team.

The movement takes place while the country accumulates debts with multilateral collegiate bodies and Itamaraty warns about the risk of losing votes in entities such as the UN (United Nations).

In analyzes on the subject, the economic team identified that Brazil is disadvantaged in some organizations and that it participates in certain entities in a redundant manner.

Among the organizations that fit into this scenario are Focem (Fund for Structural Convergence of Mercosur) and Fonplata (Financial Fund for the Development of the La Plata Basin). The two bodies demand more than R$ 550 million per year.

Focem came into operation in 2006 and makes the countries with the highest GDP (Gross Domestic Product) in Mercosur help others. The money is mainly intended for infrastructure works.

For the economic team, Brazil pays a lot to the fund and receives little. Of the US$ 100 million (R$ 567 million) to be deposited in Focem annually, the country needs to contribute 70%; Argentina, 27%; Uruguay, 2%; and Paraguay, 1%. Per year, there are BRL 396 million.

Although they are the smallest contributors, Paraguay and Uruguay keep most of the resources —48% and 32%, respectively. Brazil and Argentina can withdraw only 10% annually.

For the Ministry of Economy, participation in Focem is not advantageous as it demands resources without productive returns. Furthermore, the criterion for sending and withdrawing money does not consider other indicators besides GDP.

If considering the GDP per capita, for example, Argentina and Uruguay are more developed than Brazil — and even so, they have more advantageous conditions at Focem.

The analyzes are carried out while the country has been fighting battles in Mercosur.

In addition to lowering import tariffs in anticipation of a consensus on the issue, Brazil defends that members of the bloc are freed to make trade agreements independently.

This agenda is defended by Uruguay and has the support of the Brazilian government. Argentina is against it.

In the case of Fonplata, the conclusion is similar to that of Focem. Brazil is the country that receives the least loans, but has the greatest payment commitment.

The fund, established by Argentina, Bolivia, Brazil, Paraguay and Uruguay in 1977 to lend to signatories, demands from the National Treasury US$ 27.6 million (R$ 156 million) a year.

In all, the country needs to invest in the fund a total of US$ 100.6 million (R$ 570.4 million) by 2026. In comparison, Brazil received an average of US$ 16.4 million (R$ 93 million) annually in loans in the last four years.

On the other hand, the Ministry of Economy concludes that, in some bodies, the country’s participation is advantageous even though it demands high amounts from the Brazilian coffers. This is the case of CAF (Corporação Andina de Fomento), which works as a multilateral bank and in which Brazil has participated since 1995.

Although CAF requires a total of US$445 million (BRL 2.5 billion) from Brazil from 2022 to 2026, the country receives more in loans. In 2019, for example, CAF sent US$1.1 billion (R$6.7 billion) in credit to the country.

In addition, CAF brings countries together in a comprehensive manner and even includes countries that make up Focem and Fonplata.

Amidst the budget constraint, Itamaraty has also been trying to demonstrate an effort to review international participations.

Recently, for example, it decided to withdraw from Sela (the Latin American and Caribbean Economic System), which is based in Venezuela.

Another move was made in relation to international organizations.

Guedes informed the IMF (International Monetary Fund) that the government was no longer interested in a local fund office. The IMF then decided to withdraw from the country.

The Ministry of Economy hopes that the in-depth analysis of participation in international organizations will be carried out more broadly by the government in order to rationalize the use of resources.

To that end, it will also propose the re-creation of an inter-ministerial commission directly linked to the Presidency of the Republic to review participation in international financial organizations, funds and institutions.

The body, which would now be made up of members of the Ministry of Economy and Itamaraty, was created in 2016 (during the PT’s Dilma Rousseff government) with a broader composition.

The group was eliminated in 2019, already in the Jair Bolsonaro (PL) government by a decree that promoted a mass extinction of collegiate bodies.

Report from leaf published in November showed that, in total, the Itamaraty estimates that the country owes R$ 8.8 billion to international organizations.