Wednesday, March 24, 2010
Crumbs from the BRICs-man's table
This is a good article talking about trade and FDI between emerging countries (China, India, Russia, and such) taking the spot of rich countries in aiding poor countries in Africa and the middle east. It talks about what types of aid, such as lending or generous commodity prices, these emerging countries have given to poor countries over the past decade and specifically during the recession. It also mentions some of the negatives of such policies.
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A lot of these African governments have recently had their debt to Western countries forgiven and now it is most likely piling up again. Big surprise: China has an agenda because their “aid” is actually tied to Chinese manufacturing companies. The rates of these loans are almost as high as the commercial rates according to this article.
ReplyDeleteThese middle emerging countries (BRICs) are extracting raw materials like copper and cotton from these poor countries rather than manufactured goods that are bought by richer countries. Poorer countries that now trade more with these BRICs are not better off with trading raw materials because this forces them to depend on volatile commodities. And also don’t forget that China depresses its own exchange rate, which undermines competition for these countries who must now also push down their own currencies.
History is pretty clear on this and we know this usually ends badly for the countries being taken advantage of. This idea doesn’t allow poorer countries to expand their manufacturing industries. Like what China did to grow richer.
More than half of this article is discussing how this is going to be a huge downer for these poor countries. So this aid may just be a trap that poor countries have no choice but to fall into…