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Lula faces numerous challenges as Brazil assumes G20 presidency | Business and Economy News

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As Brazil takes over the G20 presidency on December 1 from India, Luiz Inácio Lula da Silva will be challenged to fulfil his promise of holding up the interests of the global south amid two ongoing wars and a slowing global economy.

Lula also takes over at a time of bitter internal divisions within the group, the legacy of outgoing president Narendra Modi, whose team, eager to force a joint declaration, ran roughshod over diplomatic niceties in closed-door meetings.

Despite these hurdles, Lula is forging ahead and has announced Brazil’s three key priorities as head of the G20: social inclusion and the fight against hunger, phasing out fossil fuels in favour of renewable energy and reforming global economic governance.

The Group of Twenty – the G20 – is a forum for the world’s largest economies to coordinate on key issues of global policy. Between them, G20 countries represent 85 percent of global output and two-thirds of the world’s population.

The G20 is made up of the European Union and 19 other countries, a mix of advanced and emerging economies. At its G20 leadership summit in September, India invited the African Union – representing 55 countries from across the continent – to become a member of the group.

This was seen as a step to underscore Modi’s self-prescribed role as “the mother of democracy … to mitigate the global trust deficit” between rich and poor nations.

The G20 was founded in 1999, following the Asian financial crisis. Originally designed as a council for finance ministers to discuss macroeconomic policy, its scope has since widened to cover issues ranging from global development to climate change and gender equality.

Critics, in turn, have dismissed the G20 as an ineffectual talking shop. In over 200 meetings, the group did coalesce around its yearly declaration. Otherwise, New Delhi only delivered one joint statement – on the African Union.

Against a backdrop of rising geopolitical tensions, South Africa and Brazil have openly criticised Israel’s bombardment of Gaza. For its part, China hosted a delegation of Muslim countries in November calling for a ceasefire. Elsewhere, the ongoing conflict in Ukraine has also undermined efforts at consensus-building.

Despite maintaining a neutral stance on that conflict, India has become more critical of Russia in recent months. Modi has also pared back military purchases from Moscow and bolstered diplomatic ties with the West.

Vladimir Putin, who is under an international arrest warrant for war crimes, declined to attend September’s gathering in New Delhi. President Xi Jinping of China also skipped the event, amid growing geopolitical tensions with India and deepening ties with Russia.

That didn’t stop India from “turning the annual summit into a commercial for the personality cult of Modi,” said Jayati Ghosh, an economics professor at the University of Massachusetts Amherst. “In practice, it was an ineffectual presidency,” with the host keener on boosting its domestic image than addressing global challenges.

“While trying to project India as a global superpower, Modi passes on the baton with no shortage of problems … the world economy is slowing, climate change is looming and conflicts in the Ukraine and Palestine have undermined north-south relations,” she added.

Modi
Lula also takes over at a time of bitter internal divisions within the group, the legacy of outgoing president Narendra Modi [File: Evelyn Hockstein/AFP]

Ahead of this week’s handover, Lula informed a virtual summit of G20 leaders that “I hope this [Israeli-Palestinian ceasefire] agreement can pave the way for a lasting political solution to the conflict.”

Brazil has long maintained support for a two-state solution. Since Hamas’s attacks on October 7 and the ensuing Israeli bombardment of Gaza, Lula has repeatedly called for a swift and definitive end to the fighting.

In October, Brazil spearheaded a UN Security Council resolution which called for a pause in the conflict but was vetoed by the US.

“Lula’s position on Israel is delicate, but he’s arguably the best-placed global statesman to try and stop the carnage,” added Ghosh.

Elsewhere, Brazil’s president has irked Western leaders by suggesting that Russia and Ukraine share joint responsibility for their conflict. He has publicly backed both Xi Jinping and Vladimir Putin to attend the G20 summit in Rio de Janeiro next year.

Equitable global growth

At the G20 summit in New Delhi in September, President Lula urged leaders to try and end world hunger by 2030.

“Part of that could be achieved through the creation of a global task force against hunger,” a Brazilian government official, who asked not to be named, told Al Jazeera.

“The task force would seek to rally support in areas like low-carbon agricultural research and farming insurance improvements, especially in food-insecure countries … that would require more funding from wealthy nations,” the source said. It’s not clear how likely it is that those would come through.

Lula has also backed the idea of a minimum global corporate tax rate of 15 percent. The Organisation for Economic Cooperation and Development (OECD) plan, designed in 2021 to clamp down on tax evasion and stem decades of tax ‘competition’ between governments, could generate at least $150bn in additional global tax revenues annually.

Almost 140 governments have signed up to the OECD agreement, and are at varying stages of turning the proposal into law.

“By expanding the OECD’s scheme, Brazil also wants to ramp up investment in the green transition. Lula wants the G20 to deploy more funds in renewable energy and nature conservation projects,” the official noted.

Indian Prime Minister Narendra Modi waves during his visit to the International Media Center at the end of the G20 Summit
India turned the G20 summit into ‘a commercial for the personality cult of Modi’ [File: Dar Yasin/AP Photo]

Reforming multilateral institutions

For years, Lula has lobbied to reinforce the role of multilateral bodies such as the United Nations to try and resolve global challenges. His commitment to diplomacy, however, goes beyond a penchant for consensus.

At the UN General Assembly in New York in September, Lula defended the need to reshape the global governance system. “The unequal and distorted representation at the helm of the IMF [International Monetary Fund] and World Bank is unacceptable,” he said.

In 2022, the IMF provided $160bn in SDRs, the Fund’s reserve currency, to European countries and just $34bn to all of Africa.

“The unfair allocation of SDRs is only part of the problem,” says Rogerio Studart, a former Brazilian representative to the World Bank.

“Fund quota limits are also too small for emergency lending,” said Studart. He was alluding to IMF programmes such as the Resilience and Sustainability Trust, where country grants are capped at 150 percent of their capital commitments into the fund.

“These curb the amount of money available for climate disasters, especially in low-income countries. I think that Lula will try and raise country quotas for emergency lending, and attempt to reduce the conditions attached to these programmes,” he added, pointing out that its success was unclear as this had been tried for years,”

Studart also dismissed the World Bank’s “cautious” approach to risk tolerance.

“The Bank can raise considerably more money for developing countries by adjusting its loan-to-equity ratio,” he said. A higher ratio would add to the Bank’s lending capacity, but come with a higher risk of non-repayment.

His remarks echo a G20 report published in July which said that by raising their lending ratio slightly, groups like the World Bank could unlock billions of extra dollars in new lending. “Brazil will echo the findings from the report,” Studart said.

For Ghosh, the economics professor, “Lula is nothing if not pragmatic. Where the previous G20 presidency was more about domestic politics, Lula is the ideal candidate to try and restore a measure of stability to today’s fractious world order.”

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