Financial agreement | Summit in Paris to provide financial solutions to the climate threat in the countries of the global South

2023-06-22 20:50:48

Help the countries of the global South at a time when differences with the North are accentuated due to the covid-19 crisis and the war in Ukraine. Provide them with financial mechanisms so that they can fight poverty, but also face the climate urgency. To do this, reform the institutions resulting from the Bretton Woods system (World Bank, International Monetary Fund…). These are objectives as noble as they are difficult to achieve. And even more in just 48 hours.

French President Emmanuel Macron is leading a summit in Paris this Thursday and Friday to advance these challenges. More than forty heads of state and government have met in the French capital within the framework of this meeting to “a new global financial pact”. The Premier of China, Li Qiang, the President of Brazil, Lula da Silva, South Africa’s Cyril Ramaphosa, German Chancellor Olaf Scholz, US Treasury Secretary Janet Yellen… They all attended the meeting. Despite its pompous character – it is still a French specialty – no specific decisions are expected to come out. Its organizers trust, however, to advance in some measures, such as an international tax in the maritime sector.

“We must assume a leap in public financing,” Macron assured at the Brongniart Palace, the former headquarters of the Parisian stock exchange, where the summit is held. In the opening speech, he recalled that “there is already a lot of money” in circulation, but it is not usually used “at the service of the planet’s progress.” “We have a financial system resulting from a consensus of the past”that “it is not fast enough and that it is not adapted to our objectives”, he added, referring to international institutions, such as the IMF or the World Bank.

Financially and climatically vulnerable countries

Created after World War II, these organizations did not arise to respond to the climate urgency. From the Élysée, they have defended their goal of creating “a new consensus of Paris” to replace that of Bretton Wood. Despite his good intentions, Macron will probably have to settle for much more mundane achievements. The United States is opposed, in fact, to a deep reform of these institutions.

The US authorities will “put pressure” on poor country debt holders to agree to negotiate the restructuring of their debt, Yellen assured at the summit. Another measure examined would be to use the IMF special drawing rights to make some 100,000 million dollars available to countries of the South. The Prime Minister of Barbados, Mia Mottley, —the idea for this summit arose from a meeting she held with Macron last year— also defends a suspension of debt payment In the case of those countries that suffer natural disasters.

“The most vulnerable countries from a financial point of view are also the most vulnerable to the impact of climate change and therefore we have to reinforce this multilateral framework”, defended the First Vice President and Minister of Economy, Nadia Calviño, who represents Spain in Quote. 93% of the countries most vulnerable to climate deregulation are in a situation of excessive debt or will soon suffer it, according to a report by the NGO Action Aid. During the last three decades, 97% of the victims of climatic catastrophes lived in countries of the South. They allocate 10% of their GDP to adapt to climate deregulation, while they are only responsible for 4% of CO2 emissions in the world.

Growing resentment in countries of the South

After the past decade was synonymous with prosperity for many African and Latin American states —benefiting especially from China’s growth and suffering little from the consequences of the 2008 crisis—, these 20s of the 21st century have been especially difficult for these countries. Not only did they not have the financial muscle of the West to respond to the economic impact of the pandemic, but now they are also suffering from the consequences of interest rate hikes the US Federal Reserve and the European Central Bank. And the outbreak of a debt crisis is feared.

All this has favored a growing resentment from the South to the North, accentuated by the war in Ukraine. While the European and North American governments have allocated large amounts of money in military and humanitarian aid to Kiev, in addition to treating Ukrainian refugees well (nothing to do with the xenophobia suffered by other types of refugees), the African, Asian or Latin Americans reproach them for broken promises.

Currently, the public development aid just represents the 0.36% of GDP world, despite having promised in 1970 a rise to 0.7%. In 2009, the richest countries assured that they would allocate 100,000 million dollars each year to the poorest to help them cope with climate change. They were told that they would reach that figure before 2020, although in the end they will not reach it until this year. All these disappointments favored the equidistant position of many countries of the South regarding the war in Ukraine. None of them applied economic sanctions against Russia. And now they are the ones who are putting the most pressure on Moscow and kyiv to reach a peace agreement.

Macron showed since last year his concern about this distancing of the countries of the South with respect to the West. In fact, France suffers with its loss of influence in Africa. But if the centrist leader does not obtain tangible results, it will be difficult for him to reverse this trend with summits. No matter how pompous they are.