G20 under Lula’s watch
We hear from Yuefen Li, the senior advisor on South South cooperation and development finance in the Geneva-based South Centre. She analyses the initiatives proposed by Brazil during its G20 presidency - the global wealth tax on the ultra-rich and the global alliance against hunger - and looks ahead to South Africa’s presidency in 2025. And she explores the most pressing challenges facing the Global South: from interest rate hikes; to urgent reforms needed in a global financial architecture that has stayed the same despite a massive shift in the world’s geopolitics.
From the International Development Economics Associates - a network of progressive economists who centre the perspectives and needs of the Global South.
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Transcript
Hi there.
Julians Amboko:Welcome to Economics from the South.
Julians Amboko:Rethink
Julians Amboko:economics, give a voice to marginalized communities, and come up with lasting solutions to ensure a
Julians Amboko:fairer, more sustainable future for all of us.
Julians Amboko:I'm your host, Julians Amboko, a Kenyan business journalist.
Julians Amboko:It's great to have you on board this series from the International Development Economics Associates.
Julians Amboko:A network of progressive economists who challenge the way the world is run and put forward viable alternatives that
Julians Amboko:center the perspectives and needs of the Global South.
Julians Amboko:Our focus has been on two really important research areas for ideas, sovereign debt, and rethinking how the international
Julians Amboko:financial institutions are structured, governed, and operate.
Julians Amboko:Episode 5 I'm delighted to be joined by a woman with many accolades to her name.
Julians Amboko:She once taught at the University of International Business and Economics in China and was head of
Julians Amboko:the Debt and Development Finance Branch of the United Nations Conference on Trade and Development.
Yuefen Li:I'm Yuefen Li from the South Center.
Yuefen Li:I'm the senior advisor on South South cooperation and development finance.
Julians Amboko:Professor Yuefen Li, thank you so much for joining us.
Julians Amboko:Tell us about what the South Center specifically does in relation to the international finance institutions.
Yuefen Li:First of all, the South Center was established in 1995 by the South Commission.
Yuefen Li:It is established as a think tank for the developing countries.
Yuefen Li:Only, and it is an international organization, which means it is intergovernmental.
Yuefen Li:We now have 55 developing countries as members of the South Center.
Yuefen Li:For the South Center, the development finance is a very important part of the work of the center.
Yuefen Li:We follow international negotiations.
Yuefen Li:on the topic.
Yuefen Li:For instance, right now, the preparation for the finance for development next conference, which will happen in Spain in 2025.
Yuefen Li:In addition, uh, the South center also undertake research and analysis, which means, uh, we'll, we'll, Publish papers
Yuefen Li:and briefings, policy notes for the developing countries to give them ideas and advice and also keep them, uh, update
Yuefen Li:relating to the broad progress, uh, in the international community, relating to the Uh, development finance
Yuefen Li:and also, uh, brief them of the most important topics relating to the interests of the developing countries.
Julians Amboko:So when you talk about, uh, the international financial institutions, the international
Julians Amboko:financial system, in terms of the reforms you have already briefly hinted at, what are the most pressing issues
Julians Amboko:for the Global South, in particular, the global economy?
Julians Amboko:African countries.
Yuefen Li:I think the most urgent one at this moment is, uh, we are in the face of the important systemically important
Yuefen Li:developed countries hiking interest rates, which has led to the increase of Uh, for debt servicing cost, uh, of course,
Yuefen Li:the borrowing cost also, which right now is, uh, in the double digits and also has resulted in the devaluation of
Yuefen Li:national currencies, uh, including the countries in, uh, Africa, uh, some of them, uh, have, uh, their currencies
Yuefen Li:The debt even more expensive for these countries.
Yuefen Li:So together with the increase of cost of servicing debt and also outflow of financial resources, because of
Yuefen Li:the, uh, rate hiking, uh, by the fed and other actors.
Yuefen Li:Uh, countries, uh, like, uh, uh, Japan, uh, as well as, uh, the EU, uh, there has been a kind of massive outflow
Yuefen Li:of, uh, financial resources, uh, and also the lendings from multilateral institutions, uh, have not really kept pace.
Yuefen Li:So The most urgent thing right now is to provide the countries, especially countries in Africa, with
Yuefen Li:sufficient liquidity to cushion off the kind of physical gap and also that servicing gap they are facing.
Yuefen Li:Uh, however, There are various difficulties we are facing right now.
Yuefen Li:For instance, for instance, the rechanneling of the SDR, a special drawing rights in the IMF
Yuefen Li:is not happening as fast as we wish it to be.
Yuefen Li:And also there has been the discussion of issuing more SDRs.
Yuefen Li:Uh, however, we've run into Resistance from some countries, and we know that SDR is kind of liquidity, which will not
Yuefen Li:introduce cost and will not increase debt burden for the developing countries, which should be uh, Kind of increase
Yuefen Li:during the moment of difficulties for, uh, developing countries, especially African countries at this moment.
Yuefen Li:So right now it is a very important, urgent issue.
Yuefen Li:Another urgent issue is the reform of the international financial architect.
Yuefen Li:And for the reform, one very important issue is to increase the voice and quota of developing countries.
Yuefen Li:Uh, we know since the World War II, the, uh, reform of voice and quota has been going very slowly, really
Yuefen Li:lagging behind the economic development, the growing GDP, uh, growing economic importance of African countries.
Yuefen Li:And of course, the growing weight of the African countries, including, uh, uh, the population of Africa, which
Yuefen Li:now is, um, is, uh, quite important in the, uh, world.
Yuefen Li:Uh, so there has, uh, been a lot of changes in the world.
Yuefen Li:However, the international financial architecture has really not changed very much.
Yuefen Li:Professor, allow me to push you a little bit on that point and to seek clarity.
Julians Amboko:When you talk about re channeling special drawing rights, you're re channeling
Julians Amboko:from whom to whom, and why is this important?
Yuefen Li:Well, we know the allocation of of SDR is in line is according to the quota of the countries.
Yuefen Li:Right now, the majority of the quotas is of course related also to voice is in the developed countries
Yuefen Li:because they have the majority voice majority quota.
Yuefen Li:So when we have a new allocation of SDRs,
Yuefen Li:Most of the SDRs would go to developed countries, which don't really need SDRs, and they just leave it there on their balance
Yuefen Li:sheet, while the African countries, they really need this SDR.
Yuefen Li:They have very little because their quota, their voice is very little.
Yuefen Li:Uh, with the, uh, SDR new allocation, we need to allocate, re channel the unused SDRs to the
Yuefen Li:African countries, to the developing countries, uh, which are waiting for this SDR to be re channeled.
Yuefen Li:To solve some of their liquidity problem, however, however, this, uh, rechanneling takes time.
Yuefen Li:First of all, you would need to have the countries wish to transfer the, uh, SDR.
Yuefen Li:to the developing countries, and then you would need to have the institution will handle the actual transfer.
Yuefen Li:So all this takes time.
Yuefen Li:It seemed to, uh, to me that the pace of the progress in reallocation, rechanneling has been quite slow, unfortunately.
Julians Amboko:Prof, you have mentioned that, um, there is resistance to the rechanneling of SDRs.
Julians Amboko:Why would there be resistance and, uh, what would that mean or what does that mean actually for the Global South?
Yuefen Li:Well, there's not only the resistance to rechanneling, there's also the resistance to floating
Yuefen Li:new, uh, SDRs, uh, because, The, when you float new SDRs, you will need to get the support of the
Yuefen Li:majority of the countries with majority of the quotas.
Yuefen Li:Uh, however, we know the United States has the vetoing power, uh, when it comes to decisions as this.
Yuefen Li:They have 16 percent of the total IMF quotas.
Yuefen Li:Quota.
Yuefen Li:Uh, the U.
Yuefen Li:S.
Yuefen Li:is the only country with this, uh, vetoing power.
Yuefen Li:And for the U.
Yuefen Li:S., they would need to have the congressional approval of the issuance of new SDR.
Yuefen Li:So for the moment, um, it seems that the U.
Yuefen Li:S.
Yuefen Li:government, at least at some of the meetings from what they've been talking about, they are not
Yuefen Li:really agreeable with further new issuance of SDRs.
Yuefen Li:Of course, SDR would also dilute Uh, I mean, with the new issuance of SDR, it would also be diluting the, the importance of, uh,
Yuefen Li:some of the dominant, uh, currencies in the world at this moment.
Yuefen Li:So there are various.
Yuefen Li:Factors relating to the support or no support to the floating of the new SDRs, the same with the rechanneling of SDRs, how
Yuefen Li:much to who all this Uh, to who means to which country, so all this would require a certain kind of approval and support from
Yuefen Li:the, uh, countries, uh, with, uh, important shares of quotas.
Julians Amboko:Thank you for that, Prof.
Julians Amboko:I'd imagine the dominant currencies you're talking about here are the likes of the U.
Julians Amboko:S.
Julians Amboko:dollar, the sterling pound.
Yuefen Li:The U.
Yuefen Li:S.
Yuefen Li:dollar, the, uh, euro, the yen, uh, right now, uh, they are quite important if you look at the share of the foreign
Yuefen Li:exchange reserves and also, uh, the, uh, debt, uh, holdings.
Julians Amboko:Thank you for that, Prof.
Julians Amboko:Now allow me to switch gears here and talk about matters g20.
Julians Amboko:So Brazil is currently the chair of the G20 presidency.
Julians Amboko:And the theme here is building a just world and a sustainable planet.
Julians Amboko:It seems as if this is a very unprecedented G20 presidency in many ways.
Julians Amboko:What can be realistically achieved with Brazil at the helm of the G20?
Yuefen Li:I think, uh, the Brazilian presidency so far has already done a great job.
Yuefen Li:Uh, The formulation of the Global Alliance Against Hunger is, uh, welcomed by almost everyone, uh, because
Yuefen Li:we know that hunger is a very important SDG goal, and, uh, with the poverty crisis, we've really suffered.
Yuefen Li:Foot reversal, uh, in implementing this goal because of the increasing number of people suffering, uh, from hunger
Yuefen Li:and this increasing number, actually a great majority is.
Yuefen Li:in the sub Saharan African countries.
Yuefen Li:And, uh, the, the Brazilian presidency has taken this as a major challenge, and they have already
Yuefen Li:formulated with a very impressive, uh, global alliance.
Yuefen Li:And also, in order to tackle the problem of widening inequality, the Brazilian presidency has, uh, uh,
Yuefen Li:has made great progress in formulating a resolution.
Yuefen Li:Uh, the, uh, global taxation against the very rich.
Yuefen Li:Uh, and this is something very impressive and has one international support.
Yuefen Li:So, uh, we, we see the kind of difference when countries like, uh, uh, Brazil is in the helm of G20.
Yuefen Li:Professor, allow me to seek a little more color when you talk about, especially the, um, Efforts being
Yuefen Li:undertaken when it comes to taxing the very rich globally.
Yuefen Li:We know there's been so much debate around how to structure especially wealth taxes when it comes to the global south Give
Yuefen Li:us a little more color around how that has been done, especially with brazil spearheading the effort I think for them the
Yuefen Li:most important thing they've done is to keep kind of, uh, uh, reaching out and get a global consensus or consensus from the,
Yuefen Li:uh, countries within the G20 to support this great initiative.
Yuefen Li:Uh, we know that, uh, Uh, for taxation issues, uh, in some countries, they've introduced new taxation, uh, which is
Yuefen Li:terribly regressive and, uh, which has, uh, led to, uh, protests from the, uh, poor and from the young people, uh,
Yuefen Li:because, uh, Right now, people in the developing countries are still coping with the crisis on the cost of living.
Yuefen Li:And to increase taxes regressively would certainly make the poor suffer even more.
Yuefen Li:What the beauty of the Brazilian initiative is that they realize that the top 10 or 5 percent of the rich in the world
Yuefen Li:have having a kind of expanding pie of the global wealth.
Yuefen Li:So they think the, they need to tax more.
Yuefen Li:And very often the very rich, they don't pay taxation at all.
Yuefen Li:There are various kinds of measures and ways to avoid paying taxation.
Yuefen Li:So this initiative certainly has won support from countries.
Julians Amboko:Prof, speak to us a little more about the global alliance around hunger, because this is
Julians Amboko:a particularly pressing issue, especially in Africa.
Yuefen Li:I think right now, uh, they've just established this and there was a meeting, I think, took place, uh,
Yuefen Li:last month and, uh, there was resounding consensus on that.
Yuefen Li:I think to follow up, we will see what, uh, specific, uh, mirrors.
Yuefen Li:and tasks they will take up.
Yuefen Li:So, we look forward with great anticipation to the details relating to what to come up in the future.
Julians Amboko:Brazil should be handing on the G20 presidency to South Africa.
Julians Amboko:What can we expect?
Julians Amboko:What are some of the things you would hope for as you look forward to the South African presidency?
Yuefen Li:I think for each presidency, the country can only handle a few questions.
Yuefen Li:uh, issues.
Yuefen Li:They cannot handle all the pressing issues, all the global challenges.
Yuefen Li:Uh, so for the Brazilian presidency, they've tackled a few and has made great progress.
Yuefen Li:So the rest, uh, Probably they would wish some of the issues they wish to tackle, but have not got
Yuefen Li:the chance, uh, to really go deeper into that.
Yuefen Li:Uh, I, I think the Brazilian presidency would wish that the South African presidency would
Yuefen Li:continue to go further on this kind of challenges.
Yuefen Li:Uh, of course, uh, for, uh, South, uh, Africa.
Yuefen Li:It is a important country in African, in the African continent.
Yuefen Li:Of course, the South African presidency would like to, uh, focus on some of the African orientated issues.
Yuefen Li:So at this moment, I think the, uh, South African, from what I know, the South African, uh, presidency is making preparations.
Yuefen Li:Trying to seek very broad, uh, kind of, uh, partnerships, uh, in discussing which should be the priorities, uh,
Yuefen Li:that the, uh, the South African presidency should take up.
Yuefen Li:Uh, they've already contacted some of the international organizations.
Yuefen Li:South, uh, South Center included, and also seeking inputs from these institutions, think tanks, famous personalities,
Yuefen Li:so they would like to see out of all these, uh, proposals from different partners, what would be most suitable,
Yuefen Li:uh, for the, uh, South African presidency, what will be achieving the greatest impact in a problem solving?
Yuefen Li:So I think South Africa is right now in the process of selecting the priorities for the South African presidency.
Yuefen Li:And in this process, they have already joined hands with the Uh, Brazilian presidency, uh, for, for instance, the, the sous
Yuefen Li:chef, uh, of, uh, Brazil has already, uh, gone to Pretoria to discuss, uh, with, uh, the South, uh, African authorities.
Yuefen Li:So I think, uh, the discussions are going on, uh, I think it won't take long, we'll see clearly the priorities
Yuefen Li:chosen by the, uh, South, uh, African government.
Julians Amboko:So we are talking about passing the baton to South Africa in the G20 presidency.
Julians Amboko:And we know the African union has been admitted as a member of the G20.
Julians Amboko:What do you make of those two occurrences?
Julians Amboko:Do you think it really strengthens, uh, South Africa's presidency?
Yuefen Li:Certainly, African Union is very much involved and actually strengthened the hand of South Africa
Yuefen Li:in the preparation for the South African presidency.
Yuefen Li:For the meeting attended not long ago, not only the Brazilian presidency had sent people, uh, the African Union was.
Yuefen Li:very much, very much involved in the discussion.
Yuefen Li:So they bring the kind of perspective from the African Union, which the South African government is taking it very seriously.
Yuefen Li:So I think the African Union certainly will strengthen the hand of the South African government.
Yuefen Li:Presidency from what I see it is going to be a very strong, uh, cooperation, uh, as a two S one, uh, for the preparation
Yuefen Li:and for the implementation of the G20 South African presidency.
Julians Amboko:Professor Yuefen Li, thank you so much for your time.
Yuefen Li:Thank you.
Yuefen Li:It's really nice to be here.
Julians Amboko:Next
Julians Amboko:time.
Julians Amboko:on economics from the South, we hear from a leading critic of the current model of economic globalization, an academic
Julians Amboko:and activist who once risked 25 years in prison to expose the extent of how World Bank projects helped support
Julians Amboko:the dictatorship of Ferdinand Marcos of the Philippines.
Walden Bello:We posed as World Bank project directors coming in from abroad.
Walden Bello:And looking very haggard with our ties askew.
Walden Bello:And we were asked for IDs and we tried to pretend that we were trying to find our IDs in our pockets.
Walden Bello:And since it took such a long time, the guards just let us go in.
Walden Bello:After three years, we were able to sneak out about 6, 000 pages worth of World Bank material, which documented
Walden Bello:in detail how they supported the Marcus government
Julians Amboko:that's Walden Bello from the Philippines.
Julians Amboko:Thanks for listening to Economics from the South brought to you by the International Development Economics Associates.
Julians Amboko:Check out the show notes for a link to the ideas website and more resources.
Julians Amboko:And of course, please do share the show with others.
Julians Amboko:I'm Julians Amboko.
Julians Amboko:The producer is Penny Dale.
Julians Amboko:The concept is by Charles Abugre, C.
Julians Amboko:P.
Julians Amboko:Chandrasekhar, and atieno Ndomo of the International Development Economics Associates.
