The role of the New Development Bank in the (re)construction of the Global South in emergencial events: The case of Rio Grande do Sul

Por Rafael Voigtel Cesar

On May 14, 2024, the New Development Bank (NDB) announced in a speech by the bank’s president, Dilma Rousseff, that it will mobilize US$1.115 billion for projects in Rio Grande do Sul (RS), as a result of the ongoing climate crisis. In view of this, this opinion piece aims to briefly comment on this mobilization in order to link it to the importance of the NDB for the Global South, and more specifically for Brazil. This loan will be made according to the separation and destination presented in Figure 1 below.

Based on this, we can preliminarily relate the importance of the NDB for Brazil on two points: (i) BRICS at the head of the organization, generating attention to the demands of the Global South; (ii) partnerships with Brazilian banks.

With regard to item (i), the BRICS’ countries being in command of the institution – in the sense that they are (the five Founding Members), by the requirement of the bank’s own regulations, majority shareholders – opens doors for directing loans to the Global South, especially in emergency situations such as the present. On the other hand, when considering the institutions of the Global North, only one loan was made (without taking into account more “neutral” development banks, such as the Inter-American Development Bank and the Development Bank of Latin America and the Caribbean), via the World Bank, for US$125 million, approximately 11.21% of the value of the NDB, not to mention the disadvantage of the “details” of the regulation of each loan made by them (something I covered in an opinion article in April (1).

With respect to point (ii), it is important to note that, according to the NDB’s rules, the institution’s focus is on loans geared towards infrastructure, be it social, environmental, digital or of any other nature. However, it is necessary to have a match on the subject, with the exception of times of emergency, when the rules are more flexible, such as at the time of emergency aid. Sometimes, in order to get through the bureaucracy more easily or even to make the loan viable – considering that the NDB can finance up to a limit of 25% of the final value of a project – it partners with financial institutions, as it have done previously in Brazil with BNDES, BB and BRDE. Currently, due to the situation in RS, these partnerships are being repeated.

Such partnerships can generate a very positive spillover for Brazil. Firstly, the use of such Brazilian banks is consequently positive for them, but, in addition, it is also positive because it enables immediacy and viability in the loan process, as pointed out in the paragraph above. Secondly, the fact that public banks are being used for the situation reinforces the need for an autonomy (to a certain extent) of the public spending margin in relation to social welfare, something that is already used in everyday life in developed countries and should not be limited to emergency situations in Brazil. Thirdly, these experiences can be taken as a lesson that public banks (especially development banks and multilateral development banks) are fundamental to overcome the climate and environmental crisis, as well as underdevelopment as a whole.

Now the question that remains is: will we learn from this situation? This can, and should, generate a debate on issues that have a correlation with the current situation. Do we give due importance to the fact that we have a multilateral development bank under the command of BRICS’ countries? How can this be used to our advantage? Going further, taking into account the important roles that development banks have regained under the Lula administration, are we exploiting the full potential of such entities?

My preliminary view on the subject is that the NDB is a fundamental piece for Brazilian development and for the sovereignty of the BRICS and the Global South in overcoming an international monetary and financial system based on the US dollar, and that development banks must be better valued and exploited if we want to see underdevelopment overcome. The use of such entities should not be limited to emergency situations, but should be part of a national development plan.

In view of this, a high-level public debate must be held to confront the argument of “the people for the people” or that “private initiative is saving RS”. Private initiative, and the population in general, cannot save the state of Rio Grande do Sul. And that’s not to say that they aren’t fundamental at the moment, because they are saving thousands of lives, but such arguments give us the idea that this alone is necessary and sufficient for Rio Grande do Sul to go back to the way it was and no longer suffer the consequences of climate change at this level. 1, 50, 100 million dollars collected by these initiatives is nowhere near 1% of what is needed to do what is necessary: restructuring the infrastructure of an entire state and the EMERGENCE of an economic plan that takes into account the biases of sustainability and the environment.

All this will only be done through one movement: State financing. And I’m not just talking at the state level to help case x or y, but so that this and many other similar situations can serve as an example of the urgency of a national economic development plan based on energy transition, the green economy and the environment as a whole.

(1) The details and pre-requisites for their loans may be made more flexible in emergency cases, however, the institution does not specify how and when this may happen, nor if it will happen with Rio Grande do Sul.