Why multilateralism is at a standstill

After the Lunar New Year holiday, I visited Rio de Janeiro for a conference on the state of the global economy. I last visited Brazil in 1986, when the whole of Latin America was in the grip of a debt crisis. Today, Brazil is the "B" in the BRIC economies, with nominal gross domestic product of US$2.5 trillion, the seventh largest in the world. There is a quiet confidence in the air.

In fact, Latin America is becoming an important emerging region. The Pacific countries, such as Chile, Colombia and Peru, are leading the growth, moving to 5 per cent annual growth because of their openness to trade and ability to increase domestic investments.

What is most remarkable is the growth in trade between the leading Latin American countries and China. China moved from 36th place and 35th place in 2000, in trade with Colombia and Venezuela respectively, to being the second-largest trading partner with both countries today.

China is now the largest export market for Brazil, Chile and Peru, so there's no doubt how keen Brazilians are to learn about China.

As a member of the G20, Brazil has been an important supporter of multilateralism, since free trade has been seen as beneficial. But there are subtle changes in its views on capital flows. Large inflows of short-term capital have driven the Brazilian real upwards, and while commodity exports have benefited from a strong real, manufacturing exports are affected. Brazil is watching closely whether a global currency war will emerge.

A key question is whether the growing trend towards a multipolar world promotes multilateralism or not.

In 2011, the World Bank produced an interesting study on multipolarity. It pointed out that emerging markets' share of global trade rose from 26 per cent in 1995 to 42 per cent in 2010 and is still expanding. Specifically, by 2025, the bank estimates that the BRIC economies plus Indonesia and Korea will account for more than half of global growth.