As the world’s top leaders departed Pittsburgh and the G20 Summit last month, a shift in global priorities was already well underway, says Geraldo Vasconcellos, professor of finance and economics.
Heading into Pittsburgh, summit leaders had released a 23-page communiqué—an ambitious agenda given the global recession and the summit’s short two-day stay in the Steel City. But an equally important development was the quiet rebalancing of power taking place behind the scenes, says Vasconcellos.
"There were a few interesting details playing out in the background of the G20, especially around the repositioning of power and the roles of some of the world’s fastest-growing developing nations," says Vasconcellos, an international finance expert who has particular interest in Brazil, Russia, India, and China—otherwise known as the BRIC economies.
The issue became more important after President Barack Obama called for replacing the G8 with the G20 as the world’s premier economic forum.
At the heart of the matter was the juxtaposition of economic sustainability and financial rebound, two issues often at odds with each other. "With China and India, you essentially have fast-growing economies and the world’s heaviest polluters, all wrapped up in one," Vasconcellos says. "They aren’t mutually exclusive. However, they can’t sustain those growth rates if green, environmentally friendly measures are put in place by the global community."
The opposite seems to be true with Brazil, which has the world’s tenth largest economy. The country has seen uneven growth over the past three decades as it diversified its economy, but it has now established itself as an international leader in renewable energy. Recent government estimates show that almost 50 percent of its power comes from nearly $11 billion worth of investments in renewable energy sources like hydroelectricity and ethanol.
Brazil's 'newfound sea of riches'
Amid intense efforts to find alternative energy to fuel its economy, Brazil recently discovered a series of massive oil fields a few miles offshore in the Atlantic Ocean—the largest oil discovery in the Western Hemisphere in the past 30 years, according to industry experts.
"It’s a development that has the potential to completely change the dynamics of the Brazilian economy," says Vasconcellos, a native of Brazil. "All eyes are on Brazil and how it manages its newfound sea of riches."
Brazil now has the potential to become the world’s fourth-largest exporter of oil, dramatically shifting the global landscape of oil producers and exporters. The new oil findings will boost its known oil reserves to 50 billion to 80 billion barrels, according to various estimates.
Other countries have shown significant interest in the development. China has already funneled more than $10 billion to its BRIC partner to help build new infrastructure. France has sold submarines to Brazil as the South American country builds up its military and defense capabilities in the wake of the oil discoveries. France is also lobbying heavily for a large contract to produce fighter jets.The United States isn’t far behind. An expansion of Brazilian oil production means the U.S. can focus less on the Middle East for its energy.
"It’s almost unfathomable to believe: it seems that about 80 percent of the world’s new oil platforms are currently being built for Brazil," says Vasconcellos. "It’s such an accelerated development. Within only the past two or three years, Brazil has managed to turn the landscape of worldwide oil production on its head."
Vasconcellos says the new oil fields could very well influence global policy. During the G20 Summit, both India and Brazil were expected to press their strong interest in a permanent seat on the United Nations Security Council. There is resistance to the idea from long-time permanent members like France and the United Kingdom, who fear growing gridlock among a group that already includes political adversaries like China and Russia. Japan and Germany have also requested an expansion of the council.
It’s an argument we should expect to hear a lot more about, says Vasconcellos.
"The BRIC nations are well positioned to come pretty strong as the recovery progresses," he says. "They’ll be a lot more vocal, forceful and passionate about their roles in a new economic environment. The question becomes, ‘How will the rest of the world—the current powerbrokers—respond?’"