Image: Brazil's President Lula da Silva
Roberto Jayme  /  Reuters
Brazil's President Luiz Inacio Lula da Silva  during a news conference on Thursday. Lula's recent denunciation of the global economic crisis as one "created by white people with blue eyes" is a blunt summation of developing countries' stance ahead of the Group of 20 summit Thursday.
updated 3/31/2009 6:20:05 AM ET 2009-03-31T10:20:05

As leaders from the world's richest countries argue in London this week over how to tackle the global economic crisis, developing nations will be shouting even louder for a bigger say in any global solution.

Brazilian President Luiz Inacio Lula da Silva's denunciation of the crisis as one "created by white people with blue eyes" is a blunt summation of developing countries' stance ahead of the Group of 20 summit Thursday.

Brazil, India, China, Indonesia and other emerging economies are seeking to become an increasingly powerful voice within the G-20, amid stark warnings from aid agencies that millions more people will fall into extreme poverty and as many as half a million more babies will die because of the economic downturn.

Developing countries are suffering from withdrawal of lending by risk-averse banks, flight of the foreign investment they need to move ahead and skyrocketing interest rates. The poorest of the poor are being hit by falling prices for the agricultural and mining commodities they depend on and by shrinking foreign aid.

Poor pay biggest price
Unhappy that the destabilization of the banking system in the United States and Europe has resulted in the world's poorest countries paying a far bigger price in human terms, those countries are demanding an immediate increase in funding for developing nations. They also want to kick-start stalled world trade talks and to see a crackdown on tax havens and protectionist measures that siphon funds to rich countries.

"So far, they have felt they have been left out of any coordination, and they are the countries who will possibly suffer the most if no major actions will be taken," said Amir Amel-Zadeh, a professor at the Judge Business School at Cambridge University.

Referring to Brazil and Argentina, Silva said the London summit marks "the first time I think in the last two centuries when two developing countries come to a meeting with greater moral authority than the rich countries."

The plight of developing countries is the third priority on the main agenda at Thursday's meeting behind the debate over economic stimulus and regulatory reform, but momentum is growing to ensure discussions on those issues include acknowledgment of the world's poor.

U.N. Secretary-General Ban Ki-moon has written to leaders to urge them to approve a $1 trillion stimulus plan for developing countries and British Prime Minister Gordon Brown, the summit host, has promised to address tax evasion by rich people wealthy countries, one of the biggest obstacles to development.

'Vulnerability fund'
The World Bank has proposed a "vulnerability fund" to help poor countries, where developed countries would devote 0.7 percent of any fiscal stimulus packages to try to provide a safety net and a rapid social response effort to support areas like infrastructure and agriculture.

Development groups such as the Overseas Development Institute argue that at least $50 billion more is needed for sub-Saharan Africa to escape the worst effects of the crisis.

And a coalition of groups including ActionAid International and Oxfam said Brown must be held to his promise to crack down on tax havens, noting that multinational corporations' tax evasion alone is estimated to cost developing countries $160 billion each year — more than the $100 billion they receive in aid.

India will use Thursday's summit to challenge what it says is creeping protectionism costing Asian jobs following a report from the World Bank last week that of the G-20 members, 17 have failed to keep promises made at their last meeting in November to fight anti-trade policies.

But any suggestion that the London gathering will be a new Bretton Woods, the 1944 conference that shaped the modern international financial system, is fast disappearing to the dismay of emerging countries.

They want a change to the rich nations' clubs that have dictated the rules of the game since that time, demanding more representation at the International Monetary Fund and the World Bank and calling for those organizations to do more to rescue troubled countries. Currently the head of the IMF is always a European and the head of the World Bank is an American, under informal agreement.

China's challenges
China is being unusually forthright in challenging the U.S.-led global order, contending that its rapid response to the downturn — including a 4 trillion yuan ($586 billion) stimulus package — proved the superiority of its authoritarian, one-party political system. It wants more influence over the IMF in return for putting up more money.

"So far, China has been playing a game set up by other powers. Now China wants to be part of the agenda or rules-setting," said Ding Xueliang, a China expert at Hong Kong's University of Science and Technology.

London-based think tank Chatham House said that Brown should offer to give up Britain's single seat on the IMF to consolidate European representation.

The G-20 itself was established in Germany in 1999 with a view to encouraging dialogue between developed and developing countries, strengthening the international financial architecture and fostering sustainable economic growth and development.

Made up of 19 countries — Australia, Argentina, Brazil, Britain, Canada, China, Chile, France, Germany, India, Indonesia, Italy, Japan, Russia, South Africa, South Korea, Saudi Arabia, Turkey, the United States — plus the European Union, the grouping is designed to take in countries and regions of "systematic significance."

The bloc represents 85 percent of global gross national product, 80 percent of world trade and two-thirds of the world population.

Colin Mayer, the dean of the Said Business School at Oxford University, said that G-20 members needed to recognize "they are not talking just about New York, London and Tokyo. The sooner that they can acknowledge it, the more likely they are to get some agreement and coordination."

More on G20   |  Luiz Inacio Lula da Silva

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