In an impassioned address at the Paris Climate & Finance Summit Friday, Brazil President Lula da Silva built on his sustained critique against the institutions of Bretton Woods, calling for a fundamental restructuring of the global financial system, and denouncing their role in perpetuating global inequality. Lula also took the standard for zero deforestation.
His words appeared to resonate with attendees at the summit, many nodding in seeming agreement to his challenge to the foundations of the existing system.
Under the Bretton Woods system, most currencies were pegged to the dollar, which itself was pegged to gold. When the gold standard collapsed in the 1970s the dollar remained as the international settlement currency. It is that dollar domination that has been in Lula's crosshairs.
"I don't know why Brazil and Argentina have to trade in dollars. Why can't we do it in our coins? I don't know why Brazil and China can't do it in our currencies. Why do I have to buy dollars?" said Lula, defending his call for the need to create new currencies for international trade.
It is a line Lula has been repeating around the globe. "If it's up to me, it will happen at the BRICS meeting... it will also happen at the G-20 meeting," he said, "because we will need to get more African colleagues to participate in the G-20," noting that the African Union is further ahead in developing a common currency for trading.
"What was created after the Second World War, the Bretton Woods institutions no longer work, and no longer serve society's aspirations or interests," said Lula.
"Let's be clear that the World Bank leaves much to be desired in terms of what the world aspires to from the World Bank. Let's be clear that the International Monetary Fund leaves a lot to be desired in what people expect from the IMF."
In July 1944, at the end of WWII, the triumphant powers and 44 countries gathered in the city of Bretton Woods in New Hampshire, US, to establish a new international financial system that would foster stability and promote economic growth in the post-war era. The resulting historic conference, referred now as the Bretton Woods Conference, resulted in the creation of three key institutions: the IMF, the World Bank, and the International Trade Organioation, a precursor to the now independent World Trade Organisation.
These institutions became the cornerstones of the post-war economic order, with the IMF tasked with overseeing global monetary policy, and the World Bank focused on providing financial assistance and development programs to countries in need. Their influence remains, but Lula's comments call for an examination of their history.
The primary objective was to address the challenges posed by the economic turmoil of the interwar period, including the Great Depression and the erosion of the gold standard. Bretton Woods sought to establish a framework that would prevent a recurrence and provide a stable foundation for international trade and finance.
The IMF's mission was initially aimed at maintaining stability in international currency exchange rates to facilitate smooth cross-border transactions and prevent competitive devaluations, whereas the World Bank, officially known as the International Bank for Reconstruction and Development (IBRD), was to provide financial support for post-war reconstruction and development projects. It later expanded its mandate to encompass economic development and poverty reduction worldwide offering loans, grants, and technical assistance to member countries for infrastructure projects, social programs, and institutional capacity building. Lula has an issue with the implementation of that mandate.
These institutions, however, laid the foundation for international economic cooperation and continue to play a significant role in shaping the economic order, though their functions and roles have evolved to establish the current framework for international economic governance.
Lula began by asserting that the summit, which was Macron's idea "to set up concrete measures to help poor and developing countries better tackle issues like poverty and climate change", was not solely about climate change, but rather, it was crucial to address the pervasive issue of world inequality. He admonished the absence of discussions on inequality among presidents of influential nations.
The Brazilian president expressed dismay over the lack of discussion on inequality among influential world leaders. He emphasised the urgent need to address wage inequality, race inequality, gender inequality, education inequality, and health inequality.
Lula called for a fundamental shift in priorities, urging leaders to recognise and prioritise the issue of global inequality on par with the climate crisis. He went on to call attention to the deep-rooted wealth disparity, stressing that the rich continue to amass fortunes while the poor face increasing poverty. "If we don't discuss this issue of inequality, and if we don't put it as high a priority as the climate issue, we could have a very good climate and people could continue to die of hunger," lamented Lula.
In his critique, Lula denounced the practice of providing piecemeal aid instead of implementing transformative measures. He argued for a shift from proselytising with resources and advocated for substantial investments in infrastructure that could fundamentally change the lives of nations.
Lula's optimism shone through as he discussed initiatives like the BRICS Bank and the potential creation of the Bank of the South, highlighting their potential to bring about meaningful change. "Dilma [Rousseff] knows what we did to end hunger. She is now president of the BRICS Bank. She can now prepare her pen there to sign some loans for Brazil and other poorer countries because we are going to make a difference,” he said.
As an example, he used the current state of hunger in Brazil, noting how his far right-wing predecessor, Jair Bolsonaro, stopped poverty alleviation leaving 33 million people in a condition of hunger in contrast to the progress made during his previous presidential terms and those of his hand-picked successor, Dilma Rousseff who, as the new president of the Shanghai-based BRICS New Development Bank was in the audience.
“I will give an example from my country: I was very proud to have left the Hunger Map with President Dilma in 2012. And I am very sad that I returned to the presidency of the Republic now, my country was worse from a democratic point of view because there was a fascist ruling the country. It was worse from an educational point of view because there was no money invested in universities. It was worse from the social point of view because there was no social policy. It was worse from an economic point of view."
Capturing the interest of the attendees, Lula grieved, "And we now have to do everything we had already done. All. Everything we did between 2003 and 2016, we will have to redo everything for the country to grow again."
After putting inequality on the global radar with his passion for relieving poverty and for a more equal world, Lula said he did not want the climate issue to be an afterthought. And that is why Brazil will carry out control of deforestation, he said. “For this reason, we are going to make it a matter of honour, to put an end to deforestation in the Amazon by 2030.
“Brazil has 30 million hectares of degraded land, you don't need to cut down a tree to plant a soybean plant, a corn plant or raise cattle. Just recover the degraded lands," he said to approving applause from the audience that included John Kerry, the Biden administration’s Special Presidential Envoy for Climate, who sits in the National Security Council entirely dedicated to climate change. Also in the audience was US Secretary of Treasure, Janet Yellen.
Noting that Brazil is a raw material exporter that does not keep what it produces, Lula expressed his desire to transform all its ores into products that could be exported as finished products. "In many places around the world, companies that remove ores do not even reforest the forest. They leave the hole and walk away," Lula pointed out. "So, I want to tell you that I am back, after 13 years as President of the Republic.”
"And I will deliver, my dear [German Chancellor] Olaf Scholz. I will deliver in 2030, I will invite you to go to the Amazon, you know, with zero deforestation. And again, we will end hunger."
Underscoring Brazil's achievements in renewable energy, Lula noted the country possesses one of the cleanest energy matrices globally, with 87 per cent of its electric energy sector being renewable, in contrast to the 27 per cent global average.
In terms of overall energy sources, Lula said, "50 per cent of Brazil's energy is renewable, whereas the rest of the world only has 15 per cent renewable energy." Lula said these figures indicate progress towards fulfilling their campaign proposal of achieving zero deforestation by 2030.
Though the summit itself did not result in an agreement on implementing a tax specifically targeting the greenhouse gas emissions generated by international shipping and the financial portion failed to deliver on a debt-forgiveness plan, Lula's vision left the audience with a call for action to reevaluate the Bretton Woods institutions and to focus on promoting economic systems that prioritize social just and environmental preservation.
What remains to be seen is whether that vision can be a catalyst for dismantling entrenched inequality and deforestation, and forging a new world path to replace the Breton Woods world order, and whether that adds up to a more equitable and sustainable future.