Brazil is wary of opening up its $350 billion in foreign exchange reserves for IMF aid until it receives a political commitment to reform that would give emerging market nations greater representation and influence over the fund’s decisions.
While the IMF has around $500 billion already available, officials have estimated the fund needs more than $1 trillion to backstop the rich countries whose sovereign debt is collapsing the euro zone.
European officials have pledged to contribute $200 billion, leaving countries from poorer regions to come up with the remaining $300 billion or more. The IMF wants Brazil, Russia, India, China, Japan and oil-exporting nations to be the top contributors to the fund, according to a G-20 official.
Finance ministry officials of G-20 nations are currently meeting in Mexico to discuss the euro-zone crisis and possible solutions. The IMF has so far been unable to convince G-20 nations to make firm pledges for cash, meaning BRIC nations like Brazil have leverage for concessions.
At a G-20 meeting in France last November, Brazil agreed to investigate offering aid through a general assistance fund administered by the IMF, but refused to give direct aid to European governments or stabilization funds.
The IMF’s biggest contributor — the United States — has no intention of giving more aid to the IMF to help resolve Europe’s current woes.
by Mitchell Hall for Emerging Money