The G-20’s past accomplishments, including financial reforms and recovery after the global financial crisis in 2008, arguably have mainly benefited the world’s most industrialized and developed nations, while producing relatively few results for the developing countries.

For the next G-20 summit, the Latin American representatives – Brazil, Argentina, and Mexico – should learn vital lessons from Toronto and must not allow themselves to be bullied by more developed countries into giving up some of the financial reforms the region requires to achieve economic growth.

In response to the financial crises of the late 1990s, the G-20 was created with the intention of integrating rising economies with existing industrialized powers to foster sustainable economic growth worldwide.

The G-20 is made up of the finance ministers and central bank governors of nineteen countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Republic of Korea, Turkey, United Kingdom, and the United States. The European Union is the twentieth member of the G-20.

In addition, the Managing Director of the International Monetary Fund (IMF) and the President of the World Bank also meet with the G-20 to ensure that their global institutions operate in unison with G-20 resolutions.

The G-20 represents ninety percent of the world’s economic output, involving seventy-five percent of all world trade, and accounting for approximately two-thirds of the world’s population. Many had hoped that the G-20 would be prepared to give more global emphasis to the voices of important emerging-market economies such as Brazil.

Until 2008, when former President George W. Bush called the first summit for the G-20 into session to address the ongoing financial crisis, the leaders of the G-20 nations had never before gathered to discuss pertinent global economic issues.

Before that meeting, the G-20 was seen as a second-tier multilateral institution compared to the G-8 or the United Nations. At the height of the global recession, the members of the G-20 agreed on the root causes of the crisis, the actions needed to address the crisis immediately, common principles for financial market reform, and made a commitment to an open economy.

Much to the disappointment of developing countries, the G-20 decided that the most important reforms would be finalized at a future summit. The promised reforms included “emerging and developing economies should have greater voice and representation in [the IMF and the World Bank].”

After two subsequent summits in 2009, the promise to developing nations to institute international financial institutions (IFI) reforms is at the bottom of the agenda.

Argentina

The single most important challenge that Argentina, a country heavily dependent on exports, faced coming into the G-20 Toronto Summit was the slow recovery of global demand. Buenos Aires leadership welcomed the renewed discussion regarding the IMF’s role, due to Argentina’s unfortunate recent history with the organization.

Argentina believed that following its 2006 debt crisis the IMF imposed unduly harsh austerity measures that further debilitated the economy. Buenos Aires wanted more flexible IMF lending policies in place and a change in the IMF’s governance structure.

For instance, Argentina believed the inequitable voting system at the IMF has not been sufficiently revised, despite the agreements made at past G-20 summits. Although no formal alliances have been established with other G-20 members, Argentina has common interests with the BRIC countries (Brazil, Russia, India, and China), which have resulted in discussions aimed at creating several bilateral agreements relating to trade and financial issues.

Mexico

There were two central issues for Mexico at the recently completed G-20 Toronto Summit. The first was to have the developed nations confront the current global economic and financial crisis in a coordinated fashion. The second was to commence the restructuring of the international financial order.

Mexico planned to push for structural reforms within the IFI, including easier access to IMF credit lines for countries in financial distress. Furthermore, Mexico City joined Canada, Australia, and Brazil in opposing the global bank levy, which would be a universal bank tax to help pay for any future bank bailouts.

Finally, President Felipe Calderón laid out a plan to start thinking ahead of Mexico hosting the UN Climate Change Summit beginning next November 29 on climate change issues at Toronto.

Brazil

Brazil’s major goal coming into the Toronto Summit was to give a greater voice to developing countries within multilateral institutions such as the IMF. Brazil, along with the other BRIC countries, wanted to push for IMF governance reform and give more voting rights to developing countries.

Brasília has only a 1.38% bloc of the vote in the IMF despite having the eighth largest economy by nominal GDP. As opposed to past reforms which have been merely symbolic of the rise of developing countries, completing a true IMF governance reform would give developing countries more control over their own economic advancement.

More important than its specific agenda, Brazil’s primary focus has been on its global role, which is founded principally on its integration into global trade and financial markets.

Following the global economic crisis, Brazilian President Luiz Inácio Lula da Silva became a leading voice for the developing world and a staunch critic of the developed nations.

“Brazil, Russia, India and China have a fundamental role in creating a new international order that is more just, representative, and safe,” Lula told his BRIC counterparts at the April 2010 summit held in Brasilia.

Brazil has a unique amount of clout because it is simultaneously a member of the G-20; a leader in UNASUR, an organization made up of emerging South American countries; and an advocate for the global South.

Lula, in the final year of his presidency, hoped to leave behind a legacy as the towering figure of the developing world.

“Balancing Budgets on the Backs of the World’s Poorest”

The G-20 Toronto Summit accomplished little in terms of Brazil’s goal of reforming the IMF’s governance structure, Mexico’s desire for easier access to the IMF’s flexible credit lines, or Argentina’s calls for international monetary system’s reform.

Instead, the G-20 resolved to have all of its members halve their deficits by 2013 and to stabilize overall debt by 2016. Brazil – along with fellow BRIC members India and China – was strongly against cutting back spending at this point in the global economic recovery.

It was Brazil’s Finance Minister Guido Mantega who warned the G-20 that “we must not balance budgets on the backs of the world’s poorest people.”

Brazilian leadership rightfully believed that by cutting spending at this point in the recovery, the developing world can expect to end up paying for European and American austerity. Mantega pointed out that Brazil could easily meet the goals set by the G-20, but was concerned for others, calling the proposed measures “draconian.”

Emerging economies such as Argentina and Brazil have worried that budget cuts in rich countries would hurt their export-dependent economies. Meanwhile, German Chancellor Angela Merkel found it “amazing” that all the G-20 states involved were able to come to a consensus.

President Barack Obama was less enthusiastic, fearing that slashing spending precipitously may result in a setback to global economic recovery. Once again, the G-20 left emerging countries in the dust, while Europe got what it wanted – a move towards financial austerity.

The final communiqué from the G-20 gathering needed to accomplish more for Latin America’s developing countries, especially those in Latin America. Part of the blame falls on Lula’s decision to skip the Toronto Summit, because on that occasion, his leadership was more sorely missed than he could have possibly imagined.

Lula: Missing In Action

Instead of being present in Toronto, Lula opted to stay at home after Brazil’s deadly flooding took over his agenda. The flooding in northeastern Brazil, which Lula has described as “shocking,” killed at least fifty-one people and displaced many more.

Lula’s home state of Pernambuco was one of those most affected by the disaster. The northeastern area of Brazil is the political base for Lula’s Worker’s Party; support from this region will be critical if Lula’s handpicked successor, his former chief of staff, Dilma Rousseff, is to win the October presidential elections.

On this occasion, Lula decided to strike a Faustian bargain in which he sacrificed the most important issues of the world’s developing countries to bolster domestic political support for his party so that it could retain power.

As a result of Lula’s absence, the remaining BRIC countries canceled their scheduled meeting. The BRIC countries were scheduled to have a brief meeting immediately before the G-20 met to formulate a united stance on global governance reforms.

“It was a bad call for Brazil,” says John Kirton, co-director of the G-20 Research Group at the Munk School of Global Affairs. “Lula is not just another leader, he’s a star of the G-20 show and he’s been an important leader on a number of issues. Western leaders will listen to Lula more than they will to [China’s] Hu Jintao.”

By not attending the Toronto gathering, Lula may have missed his last chance to press the EU to not drag its heels on reforms that would award developing nations with a bigger say in the international arena.

Without the BRIC meeting, the affiliated countries were unable to provide a united front on reforming international financial institutions, which was partially responsible for IFI reforms being left off the agenda.

Lula’s absence marked the first time in thirty years that the leader of a member country did not attend a G-7, G-8, or G-20 conference. Due to Lula’s political decision to stay home, Brazil was nearly invisible at this G-20 Summit, which could come to signify a major setback for a rising power with aspirations for a greater say in global affairs.

Without Lula, the developed nations of the West were less interested in the developing world’s problems; instead, they were more inclined to focus on their own economic woes. Lula’s important issues, including IFI reform, might have been included in the final communiqué had he appeared at the summit.

Brazil’s Mantega stepped in to represent his country at Toronto, but he lacked Lula’s charisma and political clout, both of which would have been necessary to accomplish the paramount social and economic reforms that Latin America seeks.

As the Toronto Summit closed with a whimper in terms of the G-20’s message, Latin America is still waiting for its vital needs to be realized. The region’s agendas for Toronto cited earlier were ignored by the developing countries.

Brazil is still waiting for its greater say in the IMF, Argentina is still pursuing a reduction of protectionist measures, and Mexico is still seeking easier access to IMF credit lines. The leaders of Argentina, Brazil, and Mexico would be wise to present a united front for the next summit in Korea this November.

Brazil’s new president, regardless of who that is, needs to play a pivotal role in representing not only Brazil but the developing world as well.

The Toronto Summit proved the developed world is perfectly willing to leave the developing countries behind if the emerging nations do not step up to the plate and be prepared to play hardball.

John Garcia is a research associate at the Council on Hemispheric Affairs (COHA) – www.coha.org. The organization is a think tank established in 1975 to discuss and promote inter-American relationship. Email: coha@coha.org.

It is typical of his approach to this crisis which has been to try and blame others for spoiling his party. The crisis has overturned his dream of ending his mandate next year and handing over a booming economy to his successor. However, just as the boom Brazil has enjoyed in recent years was stoked by external events (with little input from Lula) it is now being jeopardized by external events.

Lula is now heading for the G-20 summit in London but whether anyone will listen to his proposals for dealing with the crisis is unlikely. In fact, his outburst is only the latest in a series of comments and actions involving the Central Bank, the electorate and the law which have shown that he is becoming increasingly authoritarian and intolerant.

Until recently, the Central Bank enjoyed an actual if not legally defined independence although it has come under criticism from within the government, virtually every political party, the trade unions and the industrial associations, such as FIESP, which supposedly believe in free enterprise but are quick to demand government interference when it suits their interests.

Lula has stood above the fray and let the Central Bank get on with its tough task of maintaining monetary policy in line with the government’s inflation targeting system.

However, he has made it clear in recent months that he expected interest rates to start falling sharply as the crisis has begun to affect the real economy, throwing people out of work, reducing consumption and even denting his North Korean-style popularity ratings of more than 80%.

The Central Bank slashed interest rates at its latest meeting by 1.5% to 11.25% and is expected to continue to cut them throughout this year. The Central Bank certainly had good grounds for doing so as inflation no longer poses much danger since the crisis has cooled economic growth.

However, there is no doubt that the Central Bank has come under extreme pressure and had it not made such a deep cut there is a good chance that some members of the monetary policy committee and perhaps even the chairman, Henrique Meirelles, would have been fired.

Several months ago I said that the Brazilian Central Bank could no longer be considered to be “independent” and I think this will be seen to be the case much more as this crisis unfolds. Meirelles is likely to stand down later this year to contest an election in his home state of Goiás. It will be interesting to see who replaces him – another banker or a political nominee.

Lula has also been using his weight to force his favorite candidate, Dilma Rousseff, down the throats of the electorate and his Workers Party (PT). Rousseff is Lula’s chief of staff and has never held any elected position. She is a former guerrilla and was imprisoned and tortured during the period of military rule.

She was energy minister until she replaced the disgraced José Dirceu who became mired down in the votes for bribe scandal known as the “mensalão”. However, she was virtually unknown outside Brasília until Lula started presenting her as the “mother” of the so-called Accelerated Growth program to boost the economy.

He has wheeled her around the country to such an extent that she now has a national recognition rating of around 10% and looks like being the PT’s candidate in next year’s presidential election whether the PT likes it or not.

Lula has also taken on the judiciary over the case of an Italian called Cesare Battisti who is wanted in Italy in connection with four terrorist murders. Battisti is a former member of a militant left-wing group and was convicted in absence and given a life sentence. His supporters claim he is innocent and that the charges against him are politically motivated.

Lula’s justice minister, Tarso Genro, ruled that the Italian should not be extradited and claimed that his decision was not politically motivated although no-one believed that. This case has led to a diplomatic row with Italy and the Italian ambassador was recalled to Rome for consultations in January.

The Brazilian Supreme Court is due to make a ruling on the case shortly but Lula has made it clear that Battisti will not be extradited regardless of the court ruling. Under Brazilian law, the President has the final say in such a case.

It is almost unbelievable that Lula could risk upsetting a country like Italy with which Brazil has such close ties over the fate of a terrorist but then it is almost unbelievable that a president of one of the world’s largest nations could blame an international crisis on “white people with blue eyes. 

John Fitzpatrick is a Scottish writer and consultant with long experience of Brazil. He is based in São Paulo and runs his own company Celtic Comunicações. This article originally appeared on his site www.brazilpoliticalcomment.com.br. He can be contacted at jf@celt.com.br.

© John Fitzpatrick 2009

The Brazilian leader seemed happy with the encounter's results. One of Brazil's revindications, the need to control the monetary flow, was heeded by the summit's participants with the decision of the G-20 to create a supervisory body to regulate the finance markets.

Lula, was also encouraged with the decision by the summiteers to resume the Doha talks, which had been stalled. While Lula returned back home he left his Foreign minister, Celso Amorim, who stayed behind in the US for a meeting with Madeleine Albright, the secretary of State during the Clinton administration from January 1997 to January 2001.

Albright is one of the senior advisers to president-elect Barack Obama. Obama himself didn't meet any foreign leader arguing that there is only one president at a time.

"It was a historical day for world politics," said Lula, just before getting together with Chinese President Hu Jintao, "because, six months ago, nobody could imagine that we would arrive at a unanimous consensus to take better care of the world finances."

The Brazilian leader has been advocating the end of the G-8 ,which according to him does not represent the real world anymore. But he is still not saying that the G-8 is dead. "I would not say that this was the end of the G-8 because the G-8, after all this time, became a friends' club and people will continue gathering."

He added, however: "Considering the political power and the representativeness of the countries that make up the G-20,  there's no logic anymore to take decisions on the economy and politics without taking into consideration today's forum".

Lula said that he was going back to Brazilian capital Brasí­lia happy. "The most important is that there is a cohesive decision of all presidents that you need to have a better management of the financial world, you need that decisions over the crisis be taken together. I felt a maturity that I hadn't seen in a long time. I always saw lots of resistance but after this crisis, everybody drank a very large cup of tea filled with humility."

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Joint Communiqué

The following declaration was issued from the Summit on Financial Markets and the World Economy.

DECLARATION:

November 15, 2008

1. We, the Leaders of the Group of Twenty, held an initial meeting in Washington on November 15, 2008, amid serious challenges to the world economy and financial markets. We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems.

2. Over the past months our countries have taken urgent and exceptional measures to support the global economy and stabilize financial markets. These efforts must continue. At the same time, we must lay the foundation for reform to help to ensure that a global crisis, such as this one, does not happen again. Our work will be guided by a shared belief that market principles, open trade and investment regimes, and effectively regulated financial markets foster the dynamism, innovation, and entrepreneurship that are essential for economic growth, employment, and poverty reduction.

Root Causes of the Current Crisis

3. During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.

4. Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption.

Actions Taken and to Be Taken

5. We have taken strong and significant actions to date to stimulate our economies, provide liquidity, strengthen the capital of financial institutions, protect savings and deposits, address regulatory deficiencies, unfreeze credit markets, and are working to ensure that international financial institutions (IFIs) can provide critical support for the global economy.

6. But more needs to be done to stabilize financial markets and support economic growth. Economic momentum is slowing substantially in major economies and the global outlook has weakened. Many emerging market economies, which helped sustain the world economy this decade, are still experiencing good growth but increasingly are being adversely impacted by the worldwide slowdown.

7. Against this background of deteriorating economic conditions worldwide, we agreed that a broader policy response is needed, based on closer macroeconomic cooperation, to restore growth, avoid negative spillovers and support emerging market economies and developing countries. As immediate steps to achieve these objectives, as well as to address longer-term challenges, we will:

* Continue our vigorous efforts and take whatever further actions are necessary to stabilize the financial system.

* Recognize the importance of monetary policy support, as deemed appropriate to domestic conditions.

* Use fiscal measures to stimulate domestic demand to rapid effect, as appropriate, while maintaining a policy framework conducive to fiscal sustainability.

* Help emerging and developing economies gain access to finance in current difficult financial conditions, including through liquidity facilities and program support. We stress the International Monetary Fund's (IMF) important role in crisis response, welcome its new short-term liquidity facility, and urge the ongoing review of its instruments and facilities to ensure flexibility.

* Encourage the World Bank and other multilateral development banks (MDBs) to use their full capacity in support of their development agenda, and we welcome the recent introduction of new facilities by the World Bank in the areas of infrastructure and trade finance.

* Ensure that the IMF, World Bank and other MDBs have sufficient resources to continue playing their role in overcoming the crisis.

Common Principles for Reform of Financial Markets

8. In addition to the actions taken above, we will implement reforms that will strengthen financial markets and regulatory regimes so as to avoid future crises. Regulation is first and foremost the responsibility of national regulators who constitute the first line of defense against market instability. However, our financial markets are global in scope, therefore, intensified international cooperation among regulators and strengthening of international standards, where necessary, and their consistent implementation is necessary to protect against adverse cross-border, regional and global developments affecting international financial stability. Regulators must ensure that their actions support market discipline, avoid potentially adverse impacts on other countries, including regulatory arbitrage, and support competition, dynamism and innovation in the marketplace. Financial institutions must also bear their responsibility for the turmoil and should do their part to overcome it including by recognizing losses, improving disclosure and strengthening their governance and risk management practices.

9. We commit to implementing policies consistent with the following common principles for reform.

* Strengthening Transparency and Accountability: We will strengthen financial market transparency, including by enhancing required disclosure on complex financial products and ensuring complete and accurate disclosure by firms of their financial conditions. Incentives should be aligned to avoid excessive risk-taking.

* Enhancing Sound Regulation: We pledge to strengthen our regulatory regimes, prudential oversight, and risk management, and ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances. We will exercise strong oversight over credit rating agencies, consistent with the agreed and strengthened international code of conduct. We will also make regulatory regimes more effective over the economic cycle, while ensuring that regulation is efficient, does not stifle innovation, and encourages expanded trade in financial products and services. We commit to transparent assessments of our national regulatory systems.

* Promoting Integrity in Financial Markets: We commit to protect the integrity of the world's financial markets by bolstering investor and consumer protection, avoiding conflicts of interest, preventing illegal market manipulation, fraudulent activities and abuse, and protecting against illicit finance risks arising from non-cooperative jurisdictions. We will also promote information sharing, including with respect to jurisdictions that have yet to commit to international standards with respect to bank secrecy and transparency.

* Reinforcing International Cooperation: We call upon our national and regional regulators to formulate their regulations and other measures in a consistent manner. Regulators should enhance their coordination and cooperation across all segments of financial markets, including with respect to cross-border capital flows. Regulators and other relevant authorities as a matter of priority should strengthen cooperation on crisis prevention, management, and resolution.

* Reforming International Financial Institutions: We are committed to advancing the reform of the Bretton Woods Institutions so that they can more adequately reflect changing economic weights in the world economy in order to increase their legitimacy and effectiveness. In this respect, emerging and developing economies, including the poorest countries, should have greater voice and representation. The Financial Stability Forum (FSF) must expand urgently to a broader membership of emerging economies, and other major standard setting bodies should promptly review their membership. The IMF, in collaboration with the expanded FSF and other bodies, should work to better identify vulnerabilities, anticipate potential stresses, and act swiftly to play a key role in crisis response.

Tasking of Ministers and Experts

10. We are committed to taking rapid action to implement these principles. We instruct our Finance Ministers, as coordinated by their 2009 G-20 leadership (Brazil, UK, Republic of Korea), to initiate processes and a timeline to do so. An initial list of specific measures is set forth in the attached Action Plan, including high priority actions to be completed prior to March 31, 2009.

In consultation with other economies and existing bodies, drawing upon the recommendations of such eminent independent experts as they may appoint, we request our Finance Ministers to formulate additional recommendations, including in the following specific areas:

* Mitigating against pro-cyclicality in regulatory policy;

* Reviewing and aligning global accounting standards, particularly for complex securities in times of stress;

* Strengthening the resilience and transparency of credit derivatives markets and reducing their systemic risks, including by improving the infrastructure of over-the-counter markets;

* Reviewing compensation practices as they relate to incentives for risk taking and innovation;

* Reviewing the mandates, governance, and resource requirements of the IFIs; and

* Defining the scope of systemically important institutions and determining their appropriate regulation or oversight.

11. In view of the role of the G-20 in financial systems reform, we will meet again by April 30, 2009, to review the implementation of the principles and decisions agreed today.

Commitment to an Open Global Economy

12. We recognize that these reforms will only be successful if grounded in a commitment to free market principles, including the rule of law, respect for private property, open trade and investment, competitive markets, and efficient, effectively regulated financial systems. These principles are essential to economic growth and prosperity and have lifted millions out of poverty, and have significantly raised the global standard of living. Recognizing the necessity to improve financial sector regulation, we must avoid over-regulation that would hamper economic growth and exacerbate the contraction of capital flows, including to developing countries. 13. We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports. Further, we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO's Doha Development Agenda with an ambitious and balanced outcome. We instruct our Trade Ministers to achieve this objective and stand ready to assist directly, as necessary. We also agree that our countries have the largest stake in the global trading system and therefore each must make the positive contributions necessary to achieve such an outcome.

14. We are mindful of the impact of the current crisis on developing countries, particularly the most vulnerable. We reaffirm the importance of the Millennium Development Goals, the development assistance commitments we have made, and urge both developed and emerging economies to undertake commitments consistent with their capacities and roles in the global economy. In this regard, we reaffirm the development principles agreed at the 2002 United Nations Conference on Financing for Development in Monterrey, Mexico, which emphasized country ownership and mobilizing all sources of financing for development.

15. We remain committed to addressing other critical challenges such as energy security and climate change, food security, the rule of law, and the fight against terrorism, poverty and disease.

16. As we move forward, we are confident that through continued partnership, cooperation, and multilateralism, we will overcome the challenges before us and restore stability and prosperity to the world economy.

Action Plan to Implement Principles for Reform

This Action Plan sets forth a comprehensive work plan to implement the five agreed principles for reform. Our finance ministers will work to ensure that the taskings set forth in this Action Plan are fully and vigorously implemented. They are responsible for the development and implementation of these recommendations drawing on the ongoing work of relevant bodies, including the International Monetary Fund (IMF), an expanded Financial Stability Forum (FSF), and standard setting bodies.

Strengthening Transparency and Accountability

Immediate Actions by March 31, 2009

* The key global accounting standards bodies should work to enhance guidance for valuation of securities, also taking into account the valuation of complex, illiquid products, especially during times of stress.

* Accounting standard setters should significantly advance their work to address weaknesses in accounting and disclosure standards for off-balance sheet vehicles.

* Regulators and accounting standard setters should enhance the required disclosure of complex financial instruments by firms to market participants.

* With a view toward promoting financial stability, the governance of the international accounting standard setting body should be further enhanced, including by undertaking a review of its membership, in particular in order to ensure transparency, accountability, and an appropriate relationship between this independent body and the relevant authorities.

* Private sector bodies that have already developed best practices for private pools of capital and/or hedge funds should bring forward proposals for a set of unified best practices. Finance Ministers should assess the adequacy of these proposals, drawing upon the analysis of regulators, the expanded FSF, and other relevant bodies.

Medium-term actions

* The key global accounting standards bodies should work intensively toward the objective of creating a single high-quality global standard.

* Regulators, supervisors, and accounting standard setters, as appropriate, should work with each other and the private sector on an ongoing basis to ensure consistent application and enforcement of high-quality accounting standards.

* Financial institutions should provide enhanced risk disclosures in their reporting and disclose all losses on an ongoing basis, consistent with international best practice, as appropriate. Regulators should work to ensure that a financial institution' financial statements include a complete, accurate, and timely picture of the firm's activities (including off-balance sheet activities) and are reported on a consistent and regular basis.

Enhancing Sound Regulation

Regulatory Regimes Immediate Actions by March 31, 2009 * The IMF, expanded FSF, and other regulators and bodies should develop recommendations to mitigate pro-cyclicality, including the review of how valuation and leverage, bank capital, executive compensation, and provisioning practices may exacerbate cyclical trends.

Medium-term actions

* To the extent countries or regions have not already done so, each country or region pledges to review and report on the structure and principles of its regulatory system to ensure it is compatible with a modern and increasingly globalized financial system. To this end, all G-20 members commit to undertake a Financial Sector Assessment Program (FSAP) report and support the transparent assessments of countries' national regulatory systems.

* The appropriate bodies should review the differentiated nature of regulation in the banking, securities, and insurance sectors and provide a report outlining the issue and making recommendations on needed improvements. A review of the scope of financial regulation, with a special emphasis on institutions, instruments, and markets that are currently unregulated, along with ensuring that all systemically-important institutions are appropriately regulated, should also be undertaken.

* National and regional authorities should review resolution regimes and bankruptcy laws in light of recent experience to ensure that they permit an orderly wind-down of large complex cross-border financial institutions.

* Definitions of capital should be harmonized in order to achieve consistent measures of capital and capital adequacy.

Prudential Oversight

Immediate Actions by March 31, 2009

* Regulators should take steps to ensure that credit rating agencies meet the highest standards of the international organization of securities regulators and that they avoid conflicts of interest, provide greater disclosure to investors and to issuers, and differentiate ratings for complex products. This will help ensure that credit rating agencies have the right incentives and appropriate oversight to enable them to perform their important role in providing unbiased information and assessments to markets.

* The international organization of securities regulators should review credit rating agencies' adoption of the standards and mechanisms for monitoring compliance.

* Authorities should ensure that financial institutions maintain adequate capital in amounts necessary to sustain confidence. International standard setters should set out strengthened capital requirements for banks' structured credit and securitization activities.

* Supervisors and regulators, building on the imminent launch of central counterparty services for credit default swaps (CDS) in some countries, should: speed efforts to reduce the systemic risks of CDS and over-the-counter (OTC) derivatives transactions; insist that market participants support exchange traded or electronic trading platforms for CDS contracts; expand OTC derivatives market transparency; and ensure that the infrastructure for OTC derivatives can support growing volumes.

Medium-term actions

* Credit Ratings Agencies that provide public ratings should be registered.

* Supervisors and central banks should develop robust and internationally consistent approaches for liquidity supervision of, and central bank liquidity operations for, cross-border banks.

Risk Management

Immediate Actions by March 31, 2009

* Regulators should develop enhanced guidance to strengthen banks' risk management practices, in line with international best practices, and should encourage financial firms to reexamine their internal controls and implement strengthened policies for sound risk management.

* Regulators should develop and implement procedures to ensure that financial firms implement policies to better manage liquidity risk, including by creating strong liquidity cushions.

* Supervisors should ensure that financial firms develop processes that provide for timely and comprehensive measurement of risk concentrations and large counterparty risk positions across products and geographies.

* Firms should reassess their risk management models to guard against stress and report to supervisors on their efforts.

* The Basel Committee should study the need for and help develop firms' new stress testing models, as appropriate.

* Financial institutions should have clear internal incentives to promote stability, and action needs to be taken, through voluntary effort or regulatory action, to avoid compensation schemes which reward excessive short-term returns or risk taking.

* Banks should exercise effective risk management and due diligence over structured products and securitization.

Medium -term actions

* International standard setting bodies, working with a broad range of economies and other appropriate bodies, should ensure that regulatory policy makers are aware and able to respond rapidly to evolution and innovation in financial markets and products.

* Authorities should monitor substantial changes in asset prices and their implications for the macroeconomy and the financial system.

Promoting Integrity in Financial Markets

Immediate Actions by March 31, 2009

* Our national and regional authorities should work together to enhance regulatory cooperation between jurisdictions on a regional and international level.

* National and regional authorities should work to promote information sharing about domestic and cross-border threats to market stability and ensure that national (or regional, where applicable) legal provisions are adequate to address these threats.

* National and regional authorities should also review business conduct rules to protect markets and investors, especially against market manipulation and fraud and strengthen their cross-border cooperation to protect the international financial system from illicit actors. In case of misconduct, there should be an appropriate sanctions regime.

Medium -term actions

* National and regional authorities should implement national and international measures that protect the global financial system from uncooperative and non-transparent jurisdictions that pose risks of illicit financial activity.

* The Financial Action Task Force should continue its important work against money laundering and terrorist financing, and we support the efforts of the World Bank – UN Stolen Asset Recovery (StAR) Initiative.

* Tax authorities, drawing upon the work of relevant bodies such as the Organization for Economic Cooperation and Development (OECD), should continue efforts to promote tax information exchange. Lack of transparency and a failure to exchange tax information should be vigorously addressed.

Reinforcing International Cooperation

Immediate Actions by March 31, 2009

* Supervisors should collaborate to establish supervisory colleges for all major cross-border financial institutions, as part of efforts to strengthen the surveillance of cross-border firms. Major global banks should meet regularly with their supervisory college for comprehensive discussions of the firm's activities and assessment of the risks it faces.

* Regulators should take all steps necessary to strengthen cross-border crisis management arrangements, including on cooperation and communication with each other and with appropriate authorities, and develop comprehensive contact lists and conduct simulation exercises, as appropriate.

Medium -term actions

* Authorities, drawing especially on the work of regulators, should collect information on areas where convergence in regulatory practices such as accounting standards, auditing, and deposit insurance is making progress, is in need of accelerated progress, or where there may be potential for progress.

* Authorities should ensure that temporary measures to restore stability and confidence have minimal distortions and are unwound in a timely, well-sequenced and coordinated manner.

Reforming International Financial Institutions

Immediate Actions by March 31, 2009

* The FSF should expand to a broader membership of emerging economies.

* The IMF, with its focus on surveillance, and the expanded FSF, with its focus on standard setting, should strengthen their collaboration, enhancing efforts to better integrate regulatory and supervisory responses into the macro-prudential policy framework and conduct early warning exercises.

* The IMF, given its universal membership and core macro-financial expertise, should, in close coordination with the FSF and others, take a leading role in drawing lessons from the current crisis, consistent with its mandate.

* We should review the adequacy of the resources of the IMF, the World Bank Group and other multilateral development banks and stand ready to increase them where necessary. The IFIs should also continue to review and adapt their lending instruments to adequately meet their members' needs and revise their lending role in the light of the ongoing financial crisis.

* We should explore ways to restore emerging and developing countries' access to credit and resume private capital flows which are critical for sustainable growth and development, including ongoing infrastructure investment.

* In cases where severe market disruptions have limited access to the necessary financing for counter-cyclical fiscal policies, multilateral development banks must ensure arrangements are in place to support, as needed, those countries with a good track record and sound policies.

Medium -term actions

* We underscored that the Bretton Woods Institutions must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy and be more responsive to future challenges. Emerging and developing economies should have greater voice and representation in these institutions.

* The IMF should conduct vigorous and even-handed surveillance reviews of all countries, as well as giving greater attention to their financial sectors and better integrating the reviews with the joint IMF/World Bank financial sector assessment programs. On this basis, the role of the IMF in providing macro-financial policy advice would be strengthened.

* Advanced economies, the IMF, and other international organizations should provide capacity-building programs for emerging market economies and developing countries on the formulation and the implementation of new major regulations, consistent with international standards.  

According to Lula, everyone knows that the crisis is not going to end tomorrow, "but the signs that the presidents are sending to society, to the world, is that we are going to operate in a more political and cohesive way and that we are going to work collectively the most delicate themes collectively. This a  very important breath of enthusiasm and a very large dosage optimism for the world living in crisis."

"We still do not have the perfect diagnosis of the causes of the crisis and don't expect much from this G20 meeting on November 15 in Washington," said Lula da Silva at a meeting of Italian unions in Rome.

"It will be the first meeting, it is the beginning, a promising start," said the Brazilian leader who is also acting president of the G20.

Speaking at a news conference with Italian leader Silvio Berlusconi, who chairs the G8 next year and proposes turning it into a G14, Lula welcomed the fact that the G20 seems to be taking over as the main forum for tackling the crisis.

"We must use the crisis as an opportunity to correct things that were wrong before the crisis and strengthen multilateral bodies, because in a globalized world we need serious and representative forums to take global decisions," said Lula.

"The G8 no longer provides this response and we need to have other countries and other continents for more democratic, more plural decisions," he said.

Lula added that since each head of government would have just a few minutes to talk in Washington, the talks would only serve to "formulate proposals" on issues like "how will the financial system function and what sort of regulations it will have."

Berlusconi agreed with Lula da Silva that not too much should be expected of the Washington gathering.

Comments seem to be in line with International Monetary Fund Managing Director Dominique Strauss-Kahn who in a weekend newspaper interview warned that "expectations should not be oversold."

Strauss-Kahn played down any prospect the meeting will lay the foundations for new financial governance, saying: "Things are not going to change overnight… A lot of people are talking about Bretton Woods II. The words sound nice but we are not going to create a new international treaty."

Brazil has floated the idea of promoting a new Bretton Woods, the monetary and financial conference that took place in 1944 to regulate the global financial system, which is still being used internationally.

In related news the São Paulo state government said it would extend a 4 billion real (US$ 1.8 billion) credit line to the automotive industry to help it ride out the current financial crisis.

This is the second injection to the auto industry: the federal government had previously made available another US$ 1.8 billion  loan.

São Paulo's Finance secretariat said in a statement that the money would be lent by state-controlled bank Banco Nossa Caixa, which will offer loans with maturities of up to 18 months to vehicle financing units.

Sales of new cars and trucks in Brazil slumped 11% in October, hurt by a severe retraction in the availability of credit due to the global financial crisis.

The slowdown follows three years of sustained growth in Brazil's auto market, which has benefited from a credit boom that helped fuel a surge in consumption. But the availability of credit has evaporated in the last two months, threatening to derail one of the fastest-growing industries in Brazil.

Mercopress

They came to the conclusion that reforms are necessary in multilateral organizations like the International Monetary Fund (IMF), the World Bank (IBRD) and the Foreign Stability Fund (FSF), so that they may answer better to international crises like the present one. One of the conclusions is that emerging nations must have greater participation in these organizations.

"The institutions of Bretton Woods must be completely reformed so that they may more adequately reflect the change of weights of economies in the global economy and answer better to future challenges. Developing and emerging nations must have an active and representative voice in these institutions," says the closing statement of the meeting.

The managing director of the IMF, Dominique Strauss-Kahn, the president of the IBRD, Robert Zoellick, and the president of the FSF also agreed that it is necessary to reform multilateral institutions, as agreed by members of the G-20, according to a report by the ministers who were present at the press conference. The managers of these organizations participated in the meeting in São Paulo.

The text also points out that the G-20 plays a "vital part" in the resolution of challenges in the global economy and needs to have its executive capacity expanded. The G-20 brings together the richest countries in the world and the main emerging nations.

The minister of Finance of Brazil, who currently occupies the presidency of the bloc, Guido Mantega, said in a press conference, after the meeting, that a new agreement like the Bretton Woods agreement should take a long time, in the time being, the G-20 "has been placed at the forefront of the process" to fight the international crisis.

"The G-20 has never been as important as it is now," pointed out the Treasury undersecretary of the United Kingdom, Stephen Timms, who also participated in the press conference. Great Britain is going to take over the presidency of the bloc in 2009.

"Financial stability is a global financial asset," added the minister of Finance of South Africa, Trevor Manuel, who was also present at the conference. The African country was in the rotating presidency of the G-20 before Brazil. The idea, according Mantega, is for the bloc to evolve from a forum of ministers and governors of central banks into an organization of heads of state.

Mantega pointed out that several consensuses were reached between rich and emerging nations during the meeting, and added that the crisis arose in developed nations, but that emerging nations are suffering the effects. He said that coordinated global action is necessary to seek a multilateral institution to head the process. "This has not been solved yet, but the G-20 is a strong candidate," he pointed out.

The ministers and central bank governors also decided that countries must adopt anticyclic policies to avoid a global recession, including the relaxing of fiscal and monetary policies, within the unique characteristics of each. He also said that it is necessary to help fight the outflow of capitals from developing nations and that the anti-crisis measures adopted by nations up to now are correct, but not enough.

This week, the member-countries are going to elaborate proposals for the summit of the G-20, to take place in Washington, the capital of the United States, next Saturday. "We are bringing together political conditions to have joint and ordered operation regarding the need for regulation of markets to avoid repetition of crises like this one," said Mantega. "In Washington, there should be political power to progress with a proposal that is ambitions," he added.

To Mantega, moments like the current one are favorable to the promotion of change in international financial rules and in multilateral mechanisms. According to him, the main divergence should take place when talks regarding instruments for stronger regulation and inspection of markets begin.

He said that some countries, like Brazil, defend more rigorous rules, greater transparency, establishments of limits to bank leverage and ways to detect the movements of derivatives on a global scale. Nations where the financial sector is more important, in turn, should be more resistant to harsher rules.

"We must recognize that countries support the financial system, not just for itself, but for the real economy to work," stated Manuel.

After the meeting in Washington, workgroups should be established to transform the proposals into instruments for effective action, which should take place in up to 90 days.

"It is urgent for all countries in the G-20 to see rapid progress, thus the importance of the meeting in Washington," said Timms. "This meeting [in São Paulo] has established solid bases for the G-20 to have better conditions in future," added Manuel. "We are going to change the car tires while it is in movement," added Mantega.

Anba – www.anba.com.br

This "struggle" has become necessary following the collapse last year of the Doha round of negotiations on trade liberalization begun in Cancun in 2003. No concrete results were obtained out of this round after years of negotiations.

The G-20 nations organized within the WTO to defend their common interests in the face of the predominance of the United States and the European Union. It includes countries with strong agro-export sectors, such as Brazil, India, Mexico, Egypt, China and South Africa.

The G-20’s principal objective is to achieve reform in world agricultural trade policies, reducing the subsidies and incentives granted to agricultural production in the US and the import tariffs imposed by the European Union.

In the recent negotiations, the G-20 managed to wrest from the EU and the US a relative concession: the approval of a series of restrictions on the practice of commercial dumping. Nonetheless, in practice, this concession is being ignored and has produced nothing.

As these two major blocks – the US and the EU – do not accept these restrictions, the WTO runs the risk of falling into terminal crisis and disappearing.

Together with the breakdown of the WTO would come the breakdown of multilateral negotiations and the growth of protectionism through bilateral agreements, in which the will of those countries with the greatest political, economic and military power will be imposed with even greater ease.

The US government provides some US$ 47 billion a year in direct agricultural subsidies, amounting to more than 18% of total American farm income. These subsidies serve, in a general sense, to compensate for the difference between the costs of agricultural production in the US, generally higher, and world market prices, generally lower.

The subsidies serve as well to aid sections of farmers to maintain profitability and guarantee a base of political support for the governing party in the US.

In the European Union, high import tariffs serve to prevent cheaper foreign imports from competing with local products, which generally sell at prices considerably higher than those set by the world market. Obviously, such tariffs serve the interests of rural private owners, who constitute one of politically most conservative sections of European society.

The European Union as well allocates close to US$ 1.6 billion annually, for example, just to subsidize the continent’s export of refined sugar. The sugar industry in the countries that make up the EU buy raw sugar from their ex-colonies in the Caribbean, Africa and the Pacific, process it in their own refineries and then sell it, in violation of the WTO’s rules, within the EU itself, at prices normally two times higher than the international rate.

Thus, with an aggressive protectionist policy, the Europeans manage to be the world’s greatest exporters of sugar, despite production costs that are double those in countries like Brazil, Thailand and Mozambique.

Through a policy of subsidies and protectionist import tariffs, the European producers, moreover, are able to trade their sugar on the world market at below their cost of production and thereby reap major profits.

Of all the major world sugar producers, Brazil has the lowest production costs. In the state of São Paulo, the greatest national producer, the cost of production is around US$ 165 a ton.

In the EU countries, the cost is approximately US$ 700 a ton. The EU’s US$ 1.6 billion in subsidies are used to bridge the huge gap between these costs and the price of sugar on the world market.

If the world market price of sugar-based alcohol, for example, was regulated directly by the cost of production, and was not distorted by protectionism, the export of Brazilian alcohol would rise by close to a billion liters a year, according to leading figures in the industry.

Because it has a highly competitive price on the world market, that is, because it has a cost of production far below international costs, the importation of Brazilian alcohol is subject to severe taxation in the US and the EU countries.

On the other hand, if European sugar was not subsidized, it would not be traded on the world market, because in other countries, the costs of production are so much lower.

In his statement to the press last year, Brazil’s Foreign Minister Amorim declared, "President Lula has a long-term historic vision of the importance of the Doha Round for Brazil. It is, without any doubt, a matter of national interest, above any party, because a more balanced world trade relationship is fundamental for our peoples.

"In regard to the US, I am confident in the desire and the political interest of President Bush to arrive at an agreement. The US is the promoter of free trade. They are very proud of this, and there are people who see the necessity of reforms in the American agricultural sector."

Thus, the entire problem, apparently, would be solved if the "neo-liberal" leaderships in the US and the EU would only follow the logic of their "liberalism" on this question. More or less, this is the way the G-20 poses the question.

If only the world agricultural market were really a free market, without national barriers, countries like Brazil, India, South Africa, China, Egypt and Mexico would be able to expand their production to unprecedented level.

Sections of the bourgeoisie and their political representatives in the G-20 countries, like Brazil’s Workers Party President Luiz Inácio Lula da Silva and other demagogues, following the arguments of their hired capitalist economists, say that if the EU and the US would only drop their protectionist policies, the countries of the G-20, beyond being able to increase their exports, could eradicate the grave social problems that flow from this protectionism, which blocks the free development of their peoples and countries.

This argument is in reality totally false. The fallacy of this thesis is obvious when we understand the real source of this high level of competitiveness enjoyed by the G-20 countries in agricultural production. The low cost of production of agricultural products in these countries flows neither from a greater capacity to produce these products nor from a higher level of productivity of labor than what exists internationally.

The real origin of the G-20’s competitive advantage lies in the shocking level of exploitation of the working class in these countries. The exploitation of rural workers in countries like Brazil, India and China is brutal, often leading to deaths. In the majority of the countries that make up the G-20, the agricultural working class is extremely underpaid and is forced to work long and backbreaking days in the fields.

In the Brazilian cane fields, for example, one finds a tragic combination of mechanized and modernized production, high rates of profit and rapid and easy enrichment for the owners, combined with misery, premature death and the super-exploitation of thousands upon thousands of workers.

The conditions of life and of work for these workers are not that much different from those that confronted slaves in colonial Brazil: being overworked daily in shifts that go far beyond the legal 8-hour day, premature death for the worker as the result of the draining away of his health and energy through inhuman levels of exploitation, miserable wages that maintain the worker living near subsistence level, unhealthy and overcrowded communal housing, and the widespread employment of children and women in long and hard days of work cutting and piling up cane while covered with soot from burning straw and under the boiling sun of tropical Brazil.

Working in areas far from the urban centers, they are left without any real representation – the so-called union leaders are generally gangsters – or protection of labor laws. They have no labor contracts and are generally migrant workers who travel from one region to another during harvest or planting seasons.

In rural areas of São Paulo, the most developed state in the country, the conditions of work are horrendous. Agricultural workers receive an advance on their salaries to cover the costs of traveling from their homes to the region where they will be working, which is then deducted from their salaries, which are often paid only after the work is completed.

Beyond this, deductions are made for housing, which, in reality, amounts to nothing more than a barracks in which the "bed" is an earthen floor covered by banana leaves. If this "lodging" offered by the landowner is not completely repaid, the worker remains a prisoner of his workplace and is stopped, including by force and threat of death, from leaving to seek work from another landowner or in another area.

The Vampire Dreams of the G-20

It is this shameful reality that hides behind the "liberating" rhetoric of the G-20. It is in reality a vampire’s dream, the dream of agricultural capital represented by the G-20 of capturing the world market for its products, enriching itself by a sudden leap by sucking more and more blood from the unorganized rural workers.

This is the banner of "dignity" that is behind the pretensions of the Brazilian foreign minister, who heads the G-20. He must at all costs revive the WTO negotiations, after the collapse of the Doha Round, in order to satisfy the insatiable drive of these bloodsuckers for greater profits.

Promoted by the political demagogues of Brazil’s Workers Party as a battle for equality, the struggle of the G-20 against the state subsidies maintained by the great powers is fundamentally a struggle for a more generous distribution of global surplus value into the pockets of the great land barons – whose interests are inseparable from those of giant multinationals like Bunge, Cargill and Archer Daniels Midland, which control an ever-increasing share of Brazilian agribusiness.

These are the real interests behind the G-20, and their struggle is a struggle to conquer the world market by means of their intense exploitation of the rural workers. Lula and Amorim, in this case, are mere lackeys for these wealthy sectors and all of their rhetoric about free trade between nations serves only to mask definite class and social interests.

In Brazil, the agrarian bourgeoisie has a strong presence in parliament and a decisive influence on various important questions. In the last parliamentary elections in 2006, the Bancada Ruralista, a super-party parliamentary front that organizes itself as a political force on behalf of interests linked to those of agribusiness – both national and multinational – in the countryside, elected close to 111 candidates between deputies and senators, distributed among the various official parties.

In the 1980s, during the constitutional reform, the agrarian bourgeoisie succeed in founding a national association to defend its interests, the so-called UDR (Democratic Ruralist Union).

The UDR was formed by the big landowners who opposed the implementation of proposals for an agrarian reform in the country. To block any such action, it also established armed paramilitary militias to defend their property from occupation by landless rural workers.

The Bancada Ruralista exerts powerful pressure not only on the Congress, but above all upon the executive. It uses its voting power to secure cheap credit from the state, to obtain the rescheduling and forgiveness of back debts, to get state subsidies for the purchase of imported supplies and fuel and to obtain permission to cultivate transgenic crops and for the use of veterinary vaccines and medicines banned by legislation.

The Bancada Ruralista in reality manages to dictate the country’s agricultural and ecological policy and to interfere in the nomination of the Minister of Agriculture and of the principal directors in the agricultural section of the Bank of Brazil, the state bank that grants loans to this sector. In the Lula government, this group managed to name both the Minister of Agriculture and the Minister of Development, both big businessmen linked to the agro-export business.

Curiously, and not by accident, the various sectors of the petty-bourgeois "left" are supporting the "struggle" of Celso Amorim, Lula and the worldwide demands for the removal of agricultural subsidies, aligning themselves, in one way or another, with the project pursued by those sections of agricultural capital which act through the G-20, and which are continuously seeking more profit and new markets.

Nothing could more clearly attest to the treacherous character of these sections of the so-called left. Whatever the opportunist illusions promoted by these layers, agricultural capital working through the G-20, will, with every conquest of new markets, simply exploit more and more workers, and this will produce not the slightest improvement in their sub-human conditions of life and work.

For another part of the so-called "left" in the G-20 countries, it is a matter of quitting the WTO and adopting an economic policy centered on the promotion of the internal market – as if this would resolve the grave social problems existing in their nation states!

According to these sections of supposed "socialists," such as the MST (Landless Workers Movement) and the Via Campesina (a type of peasant international), and even NGOs that uphold a hypothetical "solidarity trade," these massive social problems can be resolved, or at least ameliorated, if each state would direct its power to expanding the mass internal market and adopted a policy of self-sufficiency in food production.

The struggle confronting working people in Brazil and the other countries that make up the G-20 is not that of defending a national capitalist economy based on self-sufficiency and "solidarity," nor that of guaranteeing greater access to the world capitalist market for one or another capitalist country.

It can never be forgotten that behind the efforts of agrarian capital represented by the G-20 lies the super-exploitation of agricultural workers in these countries.

The struggle to defend the interests of workers, both urban and rural, can only be carried forward by organizing the working class of all countries against the owners of the means of production, including against the owners who exploit the workers of the G-20 countries.

We should fight neither for the free market, nor for the defense of national markets, but rather for the end of the market economy, for the end of national borders and for a planned socialist economy on a world scale.

This article appeared originally in the World Socialist Web Site – http://www.wsws.org

"We encourage Brazil to play a leadership role in moving the G-20 towards a successful Doha outcome – one that opens markets in both developed and developing countries and creates new trade flows," said U.S. Ambassador to Brazil Clifford Sobel. 

The Doha round was suspended last July following differences between the main groups: G-20 demanding greater access for agriculture in rich countries' markets while the US and the EU are pushing for greater opportunities for industrialized goods and services in emerging countries.

However the United States also claims that less farm protection in some emerging markets such as in India could help unlock Doha talks. But any deal needs the support of Brazil, an agricultural giant, and India, a force in the G-20.

Next week Brazilian trade officials will travel to India to get their counterparts to agree on a common negotiating strategy for the two countries, newspaper O Estado de S. Paulo reported. Brazil's Foreign Minister, Celso Amorim, met last week with U.S. Trade Representative Susan Schwab to talk about speeding up Doha.

U.S., European Union and Japanese trade officials said this week they were pushing for a world trade deal to be completed early this year. U.S. Trade Representative Susan Schwab is due to meet World Trade Organization chief Pascal Lamy in Geneva today.

Meantime France warned EU Trade Commissioner Peter Mandelson against making further concessions on agriculture.

During a meeting with Mandelson in Paris, Foreign Minister Philippe Douste-Blazy "firmly reminded" the top Brussels trade negotiator that his existing offer to cut tariffs on farm goods "constituted a red line and exhausted the European Union's room for negotiation," a ministry statement said.

France, which insists European concessions should not go beyond the reform of the EU's Common Agriculture Policy agreed four years ago, threatened previously to veto any final trade deal.

Mandelson said he had held "constructive and open" talks with Douste-Blazy, Prime Minister Dominique de Villepin and other senior French officials on Thursday. "We share the objective of reaching an ambitious, balanced conclusion to the Doha Round in 2007," he said in a statement.

Mercopress

"This is a first step" to relaunch the Doha Round negotiations which were suspended last July, said Roberto Azevedo, head of the Economics Department from the Brazilian Foreign Affairs ministry, adding that "we must send a clear signal that we’re relaunching the negotiations round as soon as possible".

The weekend event has significantly increased its rating following the announcement than next Sunday US Trade Representative Susan Schwab, European Union Trade Commissar Peter Mandelson and Japan’s Agriculture minister Shoichi Naklagawa, plus Pascal Lamy, head of WTO, will be landing in Rio do Janeiro.

The Brazilian Foreign Affairs Ministry said Brasí­lia convened the ministerial meeting to show the willingness of developing countries to retake negotiations and representatives from the G-20 23 members will be present, plus the Less Developed Countries Group; the Africa, Caribbean and Pacific Association; G-33 and the WTO African group.

Emerging countries are the great losers of the stalling of WTO talks since the heart of the debate is the access of their more competitive farm produce to the rich markets of Europe and United States. In exchange the EU and the US are demanding a greater access for their manufactured goods and service industries.

According to the schedule, emerging countries will be meeting Saturday and on Sunday will receive representatives from the EU, US and Japan in separate appointments. However Azevedo pointed out that this first step must be interpreted as a meeting for "reflection" and not "decision making or even a negotiations session," which means in good diplomatic jargon that no new proposals are expected but rather a commitment to resume the stalled talks.

Emerging countries are expected to insist on the resumption of negotiations with "no back steps", which means no review of what has been achieved so far. Another sensitive issue according to trade analysts is that all negotiators are well aware that significant stumbling blocks lie ahead: midterm Congressional elections in the US and that Congress effectively extends the White House the special negotiating powers, which expire in less than twelve months time.

When negotiations broke down, India, Brazil and leaders from the G-20 and the European Union blamed the United States. Nevertheless and in spite of the collapse of talks, "the United States seems committed to ambitious goals in agriculture," said Mr. Azevedo, and "we’re hoping this proclaimed intention becomes something effective and the US farm subsidies begin to fall."

"Evidence of creativity and unification of positions" will signal if the talks really take off or remain at their stalled confrontation, admitted Brazilian diplomatic sources.

The G-20 born in 2003 and with 23 members includes: Argentina, Bolivia, Brazil, Chile, China, Cuba, Ecuador, Egypt, Philippines, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Peru, South Africa, Thailand, Tanzania, Uruguay, Venezuela y Zimbabwe.

To them that’s the only way to ensure that the current round of negotiations in the World Trade Organization (WTO) really constitutes the "development round," as was proposed when it was launched three years ago in Doha, Qatar.

"The greatest structural distortion in international trade is in agriculture, through the combination of high tariffs, domestic supports, and export subsidies, which protect inefficient producers in the developed countries," says the document, which was drafted at the G20’s first formal meeting during the 6th WTO Ministerial Meeting, which got underway today.

When the meeting ended, the Indian minister of Trade and Industry, Kamal Nath, declared that "it is necessary to leave Hong Kong having advanced a step in the direction of ending the inequities and distortions in international trade."

Despite the widespread belief that it will be a tepid encounter, the Brazilian minister of Foreign Relations, Celso Amorim, is hopeful about the prospects for progress in Hong Kong.

"They still won’t be the advances we desire, but I believe that there will be progress permitting us to make more definitive advances at the beginning of the year," he remarked.

As an example of the type of step that could help get negotiations back on track, Amorim mentioned the possibility of defining a date for the end of export subsidies.

"This does not resolve other important problems, but it would represent a demonstration of seriousness on the part of the major subsidy-givers, especially the United States and the European Union," the minister judged, repeating comments he had made the previous night after a meeting among Brazil, Japan, the United States, the European Union, Australia, and India.

Agência Brasil

From one minute to the next, strategies change, bets are placed, teams formed and reformed, and the rules of the game shift according to the interests of the major players.

While some players with weak hands bluff, other players underestimate the strength of their hands. But in the end the power and negotiating dynamics become clear.

The cards shuffled by the WTO are, in reality, enormously complex economic prescriptions that have repercussions on not only trade but also on the national development of each country.

These cards are not, as they would have us believe, dealt evenly and at random, but rather they are fixed by the dealer – in this case the world’s wealthiest nations: the United States, the European Union, and their allies.

Once the rules of the game have been accepted, players cannot trade in any of the cards they have been dealt. The sanctions for breaking the rules are severe and include fines, protective tariffs, and temporary market closures, among others. Poor countries face huge limitations for developing independent strategies in this game.

The objective of this game is free trade for corporations – not development. The moment a playing country sits down at the table, other objectives are automatically subordinated or even cast aside by the globalization game as defined and imposed by the WTO.

Despite the fact that the current round of negotiations is called "The Doha Development Round," in practice, development and its pillars – national industrialization, food sovereignty, social welfare and equity – are discarded. Instead, market access, liberalization, international commerce and investment, and privatization become the guiding principles.

One of the most deceitful rules is the rule of reciprocity. Generally considered a basic concept of equity and equilibrium, in the context of international trade, reciprocity becomes a way of institutionalizing permanent inequality. The reason is simple: the different nations and their productive sectors enter the game with profound asymmetries between them.

The major players remain the same and continue to play with basically the same strategies. A large-stakes player, the United States holds in its hand two aces in this game: the biggest market in the world and an impressive export capacity derived from the production of huge surpluses – for example, in basic grains. In addition, U.S.-based transnational traders control important global productive chains for manufactured products.

In the WTO, the European Union, in spite of occasional quarrels, usually plays on the same team as the United States. It shares the basic strategies of forcing open new markets for its goods, extending intellectual property rights, and transferring sectors from the public to the private realm.

At the Hong Kong meeting, the strategy of developed countries will center around four points:

1) gaining access to new markets by way of formulas that permit, in some cases, extending liberalization periods and modifying terms, but that do not allow exceptions or exclusions;

2) extending terms of intellectual property guarantees to increase royalty payments and monopoly market control for knowledge industries, particularly transnational pharmaceutical companies;

3) opening up service sectors to foreign investment and;

4) guaranteeing privileged and low-risk conditions for international investors.

The creation of the Group of 20 in Cancun (G-20) at the Fifth Ministerial has resulted in some realignment among the smaller players.

Led by countries with large emerging economies such as Brazil, India, China, Pakistan, and South Africa – and peripherally but still there, Mexico – these countries now have more substantial negotiating power.

The G-20 has remained cohesive (with the notable exit of several Latin American countries) and even gained strength since its inception in 2003 through a series of meetings under the leadership of Brazil and India.

Another player that has begun to take a stance different than that of the Group of 20 is the African Union. The African Union took a strong stand against the principle of reciprocity in its relationship with the European Union, thus representing a sharp break in the rules of the game. It is possible that the African Union could take a more radical position in the Hong Kong talks.

In Hong Kong once again, the proposals on the table fail to benefit poor countries. In this context, it is necessary to change the rules of the game.

If that is not possible, the logical reply is not to play a game where so few win and so many lose. That was the response in Seattle in 1999 and Cancun in 2003. It continues to be the only response in defense of the poor for Hong Kong in 2005.

Laura Carlsen directs the Americas Program of the International Relations Center, online at www.irc-online.org.