Mar 10 2024 | Nº. 116

Editorial

Over the past week, the southern Brazilian state of Rio Grande do Sul has had to contend with massive flooding, the worst in 80 years. More than 1.45 million people have been affected, with over 417 of the state's 497 cities in distress. The federal government has mounted a robust effort to assist state authorities, including the active participation of the armed forces in rescue and other logistical efforts. These initiatives, however, have been hampered by the sheer scale of the destruction. The Porto Alegre airport, for example, the largest in the state, has been rendered unusable. Over 100 people have been killed and 130 others have been reported missing. 

President Luiz Inácio Lula da Silva referred to the devastation as a tragic wake-up call: “What happened in Rio Grande do Sul is a warning to all of us human beings. We need to take into account that the Earth is taking its toll. Strange things have been happening everywhere in the country and the world. We have time to change this.” There have been ongoing tensions during Lula’s unprecedented third term between environmental protection and the push to explore potentially profitable new oil finds, particularly at the mouth of the Amazon River. It was reported this week that deforestation in the Amazon fell by 21.8 percent since last year, reaching the lowest level since 2019. This signals that while there is much work to be done to crackdown on illegal activity in the rainforest, the Lula administration is taking this challenge seriously. The president’s comments in the wake of the flooding indicate his continued commitment to tackling climate change explicitly.

Another obstacle for the federal government in assisting Rio Grande do Sul has been a series of fake news stories disseminated by online swindlers and far-right agitators. The federal government has reportedly been working with Meta, the parent company of Instagram, Facebook, and WhatsApp, to report profiles that create and amplify dangerously misleading content. As all of Brazil mobilized in solidarity with Rio Grande do Sul this week, far-right members of Congress and a few foreign allies participated in a hearing in Washington this week before the Subcommittee on Global Health, Global Human Rights and International Organizations. Despite the attempt to claim Brazil is currently under a censorious regime limiting free speech rights, WBO fellow Fabio de Sá e Silva, associate professor of international studies and Wick Cary Professor of Brazilian Studies at the University of Oklahoma, testified at the committee’s invitation on the reality of the situation in Brazil. It speaks to the weakness of the far right’s complaints that nothing of substance came from their self-serving, misleading testimony this week.

Highlights

• GOVERNMENT APPROVAL. The approval and disapproval ratings for the Lula government remained stable between February and April of this year. A Quaest survey released this week shows that 33 percent approve of the government, compared to 35 percent in February. As the survey's margin of error is 2.2 percentage points, the results coincide. Those who consider the government to be “so-so” (regular) now total 31 percent, compared to 28 percent in February. Those who disapprove of the government are now 33 percent, compared to 34 percent two months ago. The approval and disapproval rates are, therefore, equal today. The increase of four percentage points among evangelicals who say they approve of the government is noteworthy: it was 35 percent in February, but has now risen to 39 percent.

   

• CHINA AND BRAZIL. Chinese President Xi Jinping is expected to make a state visit to Brazil in November. This visit would take place before or after the G20 summit in Rio de Janeiro. This year, the two countries celebrate 50 years of diplomatic relations. In April, Gleisi Hofmann, the president of the Workers' Party, led a delegation of left-wing politicians and activists to Beijing, where the group attended three days of seminars promoted by the Chinese Communist Party.

   

• INTEREST RATE. The Central Bank cut the basic interest rate in Brazil by 0.25 percentage points. The cut represents a slowdown in the pace of interest rate declines in the country because the six previous reductions had been 0.50 points each. The result is that the current rate went from 10.75 percent to 10.50 percent per year. The cut of just 0.25 points is a setback for Lula and those appointed by him at the Monetary Policy Committee, who were convinced that the body should have repeated a larger cut of 0.50 as a way of boosting the economy. The Central Bank, still chaired by Roberto Campos Neto, who was appointed by Bolsonaro and has independence and stability in his position, opted for a more conservative decision, citing concern about the scenario of international instability.

   

• BOLSONARO HOSPITALIZED. Former President Jair Bolsonaro was hospitalized this week in Manaus, Amazonas because of erysipelas, a bacterial skin infection. He was admitted to the hospital on Saturday, May 4 and had to return the next day. On Friday, May 3, he had gone to a hospital in Brasília because of dehydration. Bolsonaro was stabbed in the stomach in 2018. Since then, he has been hospitalized for health problems. The publication of images and messages about these hospitalizations on social networks takes on relevant political contours in Brazil because the former president and his children make these incidents moments of exhortation toward the figure of the former president.

   

• ADVERTS. On May 1, Lula announced that he intends to sign the law that expands the exemption range for income taxes. The idea is to exempt workers who currently earn up to R$5,000 in salary (US$977) a month from taxes. He also announced that he intends to open lines of credit for self-employed workers from app companies, such as taxi drivers and food and package delivery people, who work on their own.

NEWS FROM WBO, ORGANIZATIONS AND SOCIAL MOVEMENTS:

SOLIDARITY. Social movements and Brazilian civil society organizations are mobilizing to send aid to flood victims in Rio Grande do Sul. The Movimento Sem-Terra (Landless Workers’ Movement, MST) has already raised more than R$ 90 thousand (US$ 17,000) and converted its warehouses into collection points. Solidarity kitchens like the one in Viamão have been producing meals for thousands of people affected by the rains in the state. The Homeless Workers Movement (MTST), which fights for housing, has been producing and distributing up to 1,800 meals per day in the region. The Articulation of Indigenous Peoples of Brazil (APIB) opened a bank account to raise aid for the more than 80 indigenous communities affected by the floods. Citizenship Action, which already regularly carries out aid actions, redoubled its efforts and opened a space on its website to receive cash donations, which will be redirected to aid efforts in the south of the country.

BRAZILIAN AMAZON. The WBO is promoting an event in the US Congress called “Brazilian Amazon: Bilateral Cooperation in Times of Crisis” on May 14. The session runs from 2:30 pm to 3:30 pm (local time) and includes the screening of a short film and a space for questions and answers, with participation open to congressional representatives, senators, advisors, and technical teams, as well as the press and the public. The intention is to reflect on the role that the US Congress can have in formulating and enforcing U.S. legislation regarding possible relations between private companies in that country and the mining industry involved in the exploitation of resources that causes harmful consequences for the Brazilian indigenous peoples.

DEFENSE OF DEMOCRACY. By recommending a witness and providing advice to U.S. congressional representatives, the WBO participated this week in a House hearing to discuss the state of freedom of expression in Brazil. The session was called by the Subcommittee on Global Health, Human Rights and International Organizations of the Foreign Affairs Committee of the House of Representatives at the request of a group of Brazilian congressional member and far-right activists. The witness suggested by the WBO and partners was Professor Fábio Sá e Silva of the University of Oklahoma, who gave a technical explanation regarding the Brazilian judicial system and the measures that have been taken to hold those involved in attacks on democracy in the country accountable.

VIRTUAL ATTACK. A survey carried out by the Democracy in Xeque Institute shows that attacks by Twitter owner, Elon Musk against Brazilian Supreme Court Justice Alexandre de Moraes caused negative mentions of the Brazilian Judiciary to soar on social media. In October 2022, during the presidential elections, there were 60 million negative mentions, including direct attacks. Now, after Musk's posts, that number has jumped to more than 70 million. Most of the posts come from far-right influencer accounts, the institute says.

DIGITAL RACISM. Aquatune Lab has released a landmark publication to discuss the intersection of artificial intelligence and racism. The “Black Document” states that “the use and mastery of artificial intelligence techniques represents an enormous potential for this social phenomenon [of discrimination] to occur and get worse, causing segregation in various forms of the experience of blackness, from traditional communities to the highest levels of social mobility”.

Feature Article

From Fragmentation to Cooperation: The Strategic Importance of the World Bank Group’s IDA

By Marcos Vinicius Chiliatto

The world is going through a period of structural transformations that affect the global order. The relationship between the largest economic powers has been progressively deteriorating, in a scenario that coincides with the occurrence of serious armed conflicts and the broadening of economic sanctions applied to countries. Meanwhile, the institutions that have underpinned global governance since the post-war era, such as the United Nations, the International Monetary Fund (IMF) and the World Bank, face crucial challenges in remaining relevant. These institutions have undergone significant reforms to adapt to a changing international architecture and, for this reason, they find themselves under severe pressure. While the world is experiencing this process of geopolitical and geoeconomic fragmentation, the new configuration of global governance remains unknown.

Despite this complex general context, the Brazilian leadership of the G20 has made notable efforts. It is important to highlight some of the advances achieved, such as, for example, the fact that Finance Minister Fernando Haddad raised the issue of inequality and brought a proposal to tax the wealth of a super-rich minority to the debate of the 20 most powerful finance ministers in the world. Furthermore, President Luiz Inácio Lula da Silva launched the global alliance against hunger, which focuses on combating food insecurity plaguing millions of families around the world. The Brazilian leadership at the G20 has also developed innovative instruments to expand sustainable financing and protect biodiversity, while promoting an agenda of deep cooperation between international financial institutions.

Even though the geopolitical scenario is challenging, these advances in the G20 are an expression that multilateralism continues to be the best alternative. In parallel to the G20 agenda, the World Bank has just demonstrated that multilateralism can deliver positive results. A platform was recently created that will raise up to US$70 billion in additional resources to finance what we define as global challenges.

The synergy between the agenda led by Brazil at the G20 and the new strategic direction of the World Bank also becomes evident on the topic of global governance. While in the G20 Brazil is pressing for the need to reform the Bretton Woods multilateral structure, so that its institutions begin to reflect the new geoeconomic reality of the twenty-first century, the member countries of the World Bank are preparing a shareholding review discussion in the institution in 2025, which is expected to empower the global south.

This year, the World Bank Group is initiating one of its biggest undertakings: the ambitious replenishment of the International Development Association (IDA), to be agreed in December 2024.

The IDA is important because it is the main source of concessional financing institution for the world's poorest countries, offering grants and highly concessional loans.

Financing granted by the IDA is directed to projects aimed at social inclusion, combating poverty and hunger, improving basic infrastructure, promoting access to health and education, strengthening government institutions, and stimulating economic growth. In the year 2023, IDA approved more than US$30 billion in funding for 75 countries, the majority of which are in Africa. In addition to financing, IDA also plays a key role in providing technical assistance and expertise to help countries effectively design and implement their projects.

For the financial future of the IDA, it will be essential to continue developing creative instruments to increase financing volumes. One can think, for example, of the use of special drawing rights (SDRs), either as contributions as hybrid capital, or with the issuance of debt instruments linked to SDRs that would allow raising resources over longer terms. However, these initiatives would not change the main financial nature of IDA, which is to offer mainly grants and highly concessional resources. In this regard, IDA will continue to depend on frequent contributions from high- and middle-income countries.

In addition to the reach of this financing model to the poorest, IDA has a particularly strategic importance for the global south. Although the global north has historically been the largest donor to IDA (and this needs to continue), contributions from emerging countries have grown and may have additional relevance in the current historical moment.

Why should the global south increase its participation in the IDA? First, let's think about the global alliance against hunger, being discussed at the G20. In this alliance, there is a systematization component of known policies to combat hunger, namely, to strengthen south-south cooperation, and there is a resource mobilization component. In this sense, the ambitious reorganization of IDA and its strategy to combat extreme poverty and food insecurity could reinforce the financial pillar of the alliance and be an achievement also for the G20. Second, the effective contributions of the global south to the reorganization of IDA will have a direct impact on discussions on global governance, since the negotiations on the review of voting power that will take place in 2025 at the World Bank consider direct contributions to IDA. Third, while contributions from the global north are an obligation due to a historical debt with Africa, a gesture of solidarity from the global south, which gains relevance in the geopolitical and geoeconomic scenario, is also important. And in the particular case of Latin America, Haiti is a major beneficiary of IDA, and its development depends not only on resolving the monumental security challenge, but also on social inclusion and economic growth.

Given the complexity of the current global geopolitical and geoeconomic scenario, the ongoing structural transformations demand a reconfiguration of global governance institutions. The role played by Brazil in the G20 in addressing crucial issues such as inequality and food security highlights the importance of multilateralism as a way to face common challenges. The relevance of the World Bank Group's IDA stands out not only as a vital instrument for the development of the poorest countries, but also as a symbol for strengthening cooperation between the global south and the north. Emerging countries can not only play a more crucial role in tackling poverty and hunger, but also positively influence the redistribution of voting power in international financial institutions, promoting more equitable and, therefore, effective global governance. Thus, the restoration of IDA not only represents an important step in the fight against poverty, but also an opportunity to redefine power dynamics in the international context.

Marcos Vinicius Chiliatto is executive director of the World Bank Group for Brazil , and also Colombia, Dominican Republic, Ecuador, Haiti, Panama, Philippines, Suriname and Trinidad & Tobago. Previously, he worked at the Inter-American Development Bank (IDB) and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). He has a PhD in Economics from the State University of Campinas (UNICAMP). Opinions and points of view are personal and the responsibility of the author, and do not necessarily reflect the opinion of the Bank or its Board.

Feature articles express the opinions of the author and do not necessarily reflect the opinions of the editors or WBO.