How Emerging Economies Are Reshaping the International Financial System

The G20 or Group of Twenty is an intergovernmental forum comprising 19 countries and the European Union. It works to address major issues related to the global economy, such as international financial stability, climate change mitigation, and sustainable development.

By Ian Mitchell and Sam Hughes
LONDON, Feb 23 2023 (IPS)

It’s been 25 years since the 1997 Asian financial crisis led to the creation of the G20 forum for finance ministers; and 15 years since this became a leader-level meeting following the global financial crisis. During this period, there has been significant shift in the global finance and economic landscape.


The ascent of several emerging economies has seen their contributions to the multilateral finance system that supports development rise significantly. Our new report collates those contributions over the last decade for the first time. It charts how China’s annual contributions to the UN and multilateral development banks rose twenty-fold from $0.1bn to $2.2bn.

But it also looks collectively at a group of 13 rising economies whose developmental contributions to multilateral finance institutions have risen five-fold to over $6bn over the last decade.

These contributions now make up an eighth of the total; and have seen the creation of two new multilateral finance institutions.

In this piece, we draw out key findings from our analysis, including the balance between funding existing and new institutions like the New Development Bank.

We consider whether continued growth in the 13 emerging actors could generate enough new funding for development over the next quarter century, and even create an institution as large at the World Bank’s fund for low-income countries (IDA).

Despite recent rhetoric around the return to a bipolar world order, this report is evidence that a wide group of countries are already playing major role in the global economic and development system, and will continue to do so in years to come

The transformational effect of economic growth on the multilateral system

In 1990 most people in the world lived in low-income countries; by 2020, this share had fallen dramatically to just seven percent of people. Meanwhile, the share of the global population living in middle-income countries swelled from 30 percent in 1990 to 73 percent in 2020.

Such a transformation implies a greater number of countries with the economic output to contribute internationally: widening and deepening participation in the multilateral system.

And this is just what we’ve seen. Over the decade to 2019, we find a group of emerging actors have significantly increased their contributions of development finance to multilateral organisations.

These include thirteen major economies outside the group of more established providers within the Development Assistance Committee (DAC), which tend to receive more attention.

Ten of these emerging actors are G20 members, including the BRICS—Brazil, Russia, India, China, and South Africa—but others have grown quickly too: Argentina, Chile, Indonesia, Israel, Mexico, Saudi Arabia, Turkey, and the United Arab Emirates. Collectively, we refer to these thirteen emerging actors as the “E13.”

Over the decade, the E13’s annual contributions of development finance to multilateral organisations (both core and funding earmarked for particular purposes) have increased almost five-fold, from $1.3bn in 2010 to $6.3bn in 2019 (up 377 percent). And their unrestricted core contributions have risen even more: increasing from $1.0bn to $5.2bn (up 410 percent).

Of these core contributions, we see that those to UN agencies more than quadrupled over the decade, steadily rising from $0.3bn to $1.2bn (up 330 percent). But by far the most striking development in E13 core contributions has come from the creation and capitalisation of two new multilateral organisations: the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB).

The role of China

Although China has recently stepped back its bilateral finance efforts, its multilateral contributions increased steadily to 2019; and provided a third (34 percent) of the E13 total over the decade. Our colleagues have examined this in detail, including how China has the second highest aggregate voting share after the US in international finance institutions it supports.

Still, our analysis also highlights the importance of Russia, Brazil and India who each contributed over $3bn over the period and collectively contributed a further third of the total. While China’s multilateral contributions have been concentrated (59 percent) in new institutions it co-founded (see below), other providers have concentrated funding in traditional institutions: for example, Argentina, Chile and Mexico did not support the new institutions while for Saudi Arabia and UAE they were 17 percent and 21 percent respectively.

Creating new multilateral finance organisations

Over the ten-year period we examine, almost half of the E13’s core multilateral contributions were to the two new institutions (AIIB and NDB). After 2016, funding provided to these institutions made up over two-thirds of their contributions. Indeed, in 2016 the first financial contributions to AIIB and NDB causedE13 multilateral development finance to triple in a single year.

The E13 provided an additional $6.0bn of core funds for AIIB and NDB in 2016, without reducing their multilateral contributions through other channels.

Though annual contributions reduced to $3.1bn in 2019, AIIB and NDB still accounted for half of the E13’s multilateral development finance in that year, leaving their contributions at the end of the decade far ahead of the beginning.

Figure 1. E13 core and earmarked contributions of development finance to multilateral organisations (nominal USD billions)

Source: Authors’ analysis

Emerging actors fund a sixth of the UN system

As well as higher absolute contributions (Figure 1), the E13’s role in the multilateral system has also grown in relative terms (Figure 2). As a share of the level of finance provided by the 29 high-income countries in the OECD DAC, the E13’s core multilateral contributions rose from 5 percent in 2010 to 12 percent in 2019—more than doubling their relative significance.

This was largely due to the effect of AIIB and NDB (clearly seen by the 2016 peak), but we also see that E13 core contributions to the UN system steadily and quickly rose as a share of the DAC level across the decade: from 5 percent in 2010 to 17 percent in 2019.

Figure 2. E13 core contributions of development finance to multilateral organisations as a share of contributions from DAC countries

Source: Authors’ analysis

A look to 2050—what role might the emerging economies play?

As the economies of the E13 continue to grow, what might this mean for their multilateral contributions in the future? Figure 3 shows how the share of economic output provided as development finance to multilateral organisations (either core or earmarked) tends to increase with higher levels of income per capita.

Though the relationship is steeper for the DAC than the E13, even the E13’s current trajectory implies a significant increase in future multilateral development finance from this group.

Ian Mitchell is Co-Director, Development Cooperation in Europe and Senior Policy Fellow at the Center for Global Development. Sam Hughes is a Research Assistant at the Center for Global Development.

IPS UN Bureau

 


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Solar Energy Useless Without Good Batteries in Brazil’s Amazon Jungle

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Energy

Solar panels with a capacity to generate 30 kilowatts no longer work in the Darora Community of the Macuxi people, an indigenous group from Roraima, a state in the far north of Brazil. The batteries only worked for a month before they were damaged because they could not withstand the charge. CREDIT: Boa Vista City Hall

Solar panels with a capacity to generate 30 kilowatts no longer work in the Darora Community of the Macuxi people, an indigenous group from Roraima, a state in the far north of Brazil. The batteries only worked for a month before they were damaged because they could not withstand the charge. CREDIT: Boa Vista City Hall

BOA VISTA, Brazil, Jan 25 2023 (IPS) – “Our electric power is of bad quality, it ruins electrical appliances,” complained Jesus Mota, 63. “In other places it works well, not here. Just because we are indigenous,” protested his wife, Adélia Augusto da Silva, of the same age.


The Darora Community of the Macuxi indigenous people illustrates the struggle for electricity by towns and isolated villages in the Amazon rainforest. Most get it from generators that run on diesel, a fuel that is polluting and expensive since it is transported from far away, by boats that travel on rivers for days.

Located 88 kilometers from the city of Boa Vista, capital of the state of Roraima, in the far north of Brazil, Darora celebrated the inauguration of its solar power plant, installed by the municipal government, in March 2017. It represented modernity in the form of a clean, stable source of energy.

A 600-meter network of poles and cables made it possible to light up the “center” of the community and to distribute electricity to its 48 families.

But “it only lasted a month, the batteries broke down,” Tuxaua (chief) Lindomar da Silva Homero, 43, a school bus driver, told IPS during a visit to the community. The village had to go back to the noisy and unreliable diesel generator, which only supplies a few hours of electricity a day.

“The solar panels were left here, useless. We want to reactivate them, it would be really good. We need more powerful batteries, like the ones they put in the bus terminal in Boa Vista.” — Lindomar da Silva Homero

Fortunately, about four months later, the Boa Vista electricity distribution company laid its cables to Darora, making it part of its grid.

“The solar panels were left here, useless. We want to reactivate them, it would be really good. We need more powerful batteries, like the ones they put in the bus terminal in Boa Vista,” said Homero, referring to one of the many solar plants that the city government installed in the capital.

Tuxaua (chief) Lindomar Homero of the Darora Community is calling for new adequate batteries to reactivate the solar power plant, because the electricity they receive from the national grid is too expensive for the local indigenous people. Behind him stands his predecessor, former tuxaua Jesus Mota. CREDIT: Mario Osava/IPS

Tuxaua (chief) Lindomar Homero of the Darora Community is calling for new adequate batteries to reactivate the solar power plant, because the electricity they receive from the national grid is too expensive for the local indigenous people. Behind him stands his predecessor, former tuxaua Jesus Mota. CREDIT: Mario Osava/IPS

Expensive energy

But indigenous people can’t afford the electricity from the distributor Roraima Energía, he said. On average, each family pays between 100 and 150 reais (20 to 30 dollars) a month, he estimated.

Besides, there are unpleasant surprises. “My November bill climbed to 649 reais” (130 dollars), without any explanation,” Homero complained. The solar energy was free.

“If you don’t pay, they cut off your power,” said Mota, who was tuxaua from 1990 to 2020.”In addition, the electricity from the grid fails a lot,” which is why the equipment is damaged.

Apart from the unreliable supply and frequent blackouts, there is not enough energy for the irrigation of agriculture, the community’s main source of income. “We can do it with diesel pumps, but it’s expensive; selling watermelons at the current price does not cover the cost,” he said.

“In 2022, it rained a lot, but there are dry summers that require irrigation for our corn, bean, squash, potato, and cassava crops. The energy we receive is not enough to operate the pump,” said Mota.

A photo of the three water tanks in the village of Darora, one of which holds water that is made potable by chemical treatment. The largest and longest building is the secondary school that serves the Macuxi indigenous community that lives in Roraima, in northern Brazil. CREDIT: Mario Osava/IPS

A photo of the three water tanks in the village of Darora, one of which holds water that is made potable by chemical treatment. The largest and longest building is the secondary school that serves the Macuxi indigenous community that lives in Roraima, in northern Brazil. CREDIT: Mario Osava/IPS

Achilles’ heel

Batteries still apparently limit the efficiency of solar energy in isolated or autonomous off-grid systems, with which the government and various private initiatives are attempting to make the supply of electricity universal and replace diesel generators.

Homero said that some of the Darora families who live outside the “center” of the village and have solar panels also had problems with the batteries.

Besides the 48 families in the village “center” there are 18 rural families, bringing the community’s total population to 265.

A solar plant was also installed in another community made up of 22 indigenous families of the Warao people, immigrants from Venezuela, called Warao a Janoko, 30 kilometers from Boa Vista.

But of the plant’s eight batteries, two have already stopped working after only a few months of use. And electricity is only guaranteed until 8:00 p.m.

“Batteries have gotten a lot better in the last decade, but they are still the weak link in solar power,” Aurelio Souza, a consultant who specializes in this question, told IPS from the city of São Paulo. “Poor sizing and the low quality of electronic charging control equipment aggravate this situation and reduce the useful life of the batteries.”

The low quality of the electricity supplied to Darora is due to the discrimination suffered by indigenous people, according to Adélia Augusto da Silva. The water they used to drink was also dirty and caused illnesses, especially in children, until the indigenous health service began to chemically treat their drinking water. CREDIT: Mario Osava/IPS

The low quality of the electricity supplied to Darora is due to the discrimination suffered by indigenous people, according to Adélia Augusto da Silva. The water they used to drink was also dirty and caused illnesses, especially in children, until the indigenous health service began to chemically treat their drinking water. CREDIT: Mario Osava/IPS

In Brazil’s Amazon jungle, close to a million people live without electricity, according to the Institute of Energy and the Environment, a non-governmental organization based in São Paulo. More precisely, its 2019 study identified 990,103 people in that situation.

Another three million inhabitants of the region, including the 650,000 people in Roraima, are outside the National Interconnected Electricity System. Their energy therefore depends mostly on diesel fuel transported from other regions, at a cost that affects all Brazilians.

The government decided to subsidize this fossil fuel so that the cost of electricity is not prohibitive in the Amazon region.

This subsidy is paid by other consumers, which contributes to making Brazilian electricity one of the most expensive in the world, despite the low cost of its main source, hydropower, which accounts for about 60 of the country’s electricity.

Solar energy became a viable alternative as the parts became cheaper. Initiatives to bring electricity to remote communities and reduce diesel consumption mushroomed.

But in remote plants outside the reach of the grid, good batteries are needed to store energy for the nighttime hours.

Part of the so-called "downtown" in Darora, which has lamp posts, houses, a soccer field and a shed where the community meets. A larger community center is needed, says the leader of the Macuxi village located near Boa Vista, the capital of the northern Brazilian state of Roraima. CREDIT: Mario Osava/IPS

Part of the so-called “downtown” in Darora, which has lamp posts, houses, a soccer field and a shed where the community meets. A larger community center is needed, says
the leader of the Macuxi village located near Boa Vista, the capital of the northern Brazilian state of Roraima. CREDIT: Mario Osava/IPS

A unique case

Darora is not a typical case. It is part of the municipality of Boa Vista, which has a population of 437,000 inhabitants and good resources, it is close to a paved road and is within a savannah ecosystem called “lavrado”.

It is at the southern end of the São Marcos indigenous territory, where many Macuxi indigenous people live but fewer than in Raposa Serra do Sol, Roraima’s other large native reserve. According to the Special Secretariat for Indigenous Health (Sesai), there were 33,603 Macuxi Indians living in Roraima in 2014.

The Macuxi people also live in the neighboring country of Guyana, where there are a similar number to that of Roraima. Their language is part of the Karib family.

Although there are no large forests in the surrounding area, Darora takes its name from a tree, which offers “very resistant wood that is good for building houses,” Homero explained.

The community emerged in 1944, founded by a patriarch who lived to be 93 years old and attracted other Macuxi people to the area.

The progress they have made especially stands out in the secondary school in the village “center”, which currently has 89 students and 32 employees, “all from Darora, except for three teachers from outside,” Homero said proudly.

A new, larger elementary and middle school for students in the first to ninth grades was built a few years ago about 500 meters from the community.

Water used to be a serious problem. “We drank dirty, red water, children died of diarrhea. But now we have good, treated water,” said Adélia da Silva.

“We dug three artesian wells, but the water was useless, it was salty. The solution was brought by a Sesai technician, who used a chemical substance to make the water from the lagoon drinkable,” Homero said.

The community has three elevated water tanks, two for water used for bathing and cleaning and one for drinking water. There are no more health problems caused by water, the tuxaua said.

His current concern is to find new sources of income for the community. Tourism is one alternative. “We have the Tacutu river beach 300 meters away, great fruit production, handicrafts and typical local gastronomy based on corn and cassava,” he said, listing attractions for visitors.

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India Can Use The G20 to Fight Corruption and Reduce Global Inequalities

Civil Society, Economy & Trade, Global, Global Geopolitics, Global Governance, Headlines, TerraViva United Nations

Opinion

Despite unprecedented challenges, 2022 also opened windows of opportunity to move the needle around critical anti corruption issues, such as anti-money laundering, asset recovery, beneficial ownership, and renewable energy. Credit: Shutterstock.

Despite unprecedented challenges, 2022 also opened windows of opportunity to move the needle around critical anti-corruption issues, such as anti-money laundering, asset recovery, beneficial ownership, and renewable energy. Credit: Shutterstock.

Sanjeeta Pant, Jan 25 2023 (IPS) – The G20 India Presidency is marked by unprecedented geopolitical, environmental, and economic crises. Rising inflation threatens to erase decades of economic development and push more people into poverty. Violent extremism is also on the rise as a result of increasing global inequality, and the rule of law is in decline everywhere. All of these challenges impact the G20’s goal of realizing a faster and more equitable post-pandemic economic recovery.

But as India prioritizes its agenda for 2023, it is corruption that is at the heart of all of these other problems- and which poses the greatest threat to worldwide peace and prosperity.


An Idea Whose Time Has Come

Although the G20 has repeatedly committed to the Financial Action Task Force’s (FATF) anti-money laundering standards, member countries have been slow to implement policy reforms

Despite unprecedented challenges, 2022 also opened windows of opportunity to move the needle around critical anti-corruption issues, such as anti-money laundering, asset recovery, beneficial ownership, and renewable energy. When global leaders meet during the G20 Indian Presidency , they must prioritize and build on this progress, rather than make new commitments around these issues that they then fail to implement.

According to the UN, an estimated 2-5% of global GDP, or up to $2 trillion, is laundered annually. Although the G20 has repeatedly committed to the Financial Action Task Force’s (FATF) anti-money laundering standards, member countries have been slow to implement policy reforms. In the wake of the Russian invasion of Ukraine and ineffective economic sanctions against Russian oligarchs, governments have started reexamining existing policy and institutional gaps, especially recognizing the role of Designated Non-Financial Businesses and Professions (DNFBPs), also known as “gatekeepers.”

G20 member countries are responding to concerns and criticisms from their national counterparts regarding failures to adopt FATF recommendations and clamp down on “dirty money.” Grappling with the need to be able to prosecute money-laundering cases and recover billions of dollars worth of frozen assets, they are also amending national laws to be able to do so.

Lack of beneficial ownership transparency is also aiding the flow of laundered money globally. The G20 recognizes beneficial ownership data as an effective instrument to fight financial crime and “protect the integrity and transparency of the global financial system.”

The Russian invasion helped drive home this message, especially among countries that are popular destinations for those buying luxury goods and assets. FATF’s amendment of its beneficial ownership recommendations in early 2022 was timely. Member countries are also introducing new reporting rules, and fast-tracking policies and processes to set up beneficial ownership registers. While there are still gaps in the proposed policies – as identified here– these are important first steps.

Similarly, the transition to renewable energy, initially raised as an environmental issue and then as a national security concern is increasingly gaining attention from a resource governance perspective. Given the scale of the potential investment, there is a need to tackle corruption in the energy sector to avoid potential pitfalls resulting from a lack of open and accountable systems as we transition to a net zero economy.

The cross-cutting nature of the industry means a wide range of issues– from procurement and conflict of interest in the public sector to beneficial ownership transparency- need to be considered. The global energy crisis and the Indonesian Presidency’s prioritization of the issue have helped build momentum around corruption in the renewable energy transition, and this focus must continue.

Calling on India

Corruption-related issues identified here are transnational in nature and have global implications, including for India. For instance, with money laundering cases rising in India, it cannot afford to regard it as a problem limited to safe havens like the UK or the US. The same is true for the lack of beneficial ownership transparency or corruption in the renewable energy transition, which fuels illicit financial networks in India and beyond, and which often transcend national borders.

Finally, corruption has a disproportionate impact on the global poor. Almost 10% of the global population lives in extreme poverty, many of whom live in countries such as India. The G20, under the Indian Presidency, provides a unique opportunity to ensure the voices of the most vulnerable are heard at the global level. By prioritizing the anti-corruption agenda and building on past priority issues and commitments, the Indian government can lead efforts to bridge the North-South divide.

Sanjeeta Pant is Programs and Learning Manager at Accountability Lab. Follow the Lab on Twitter @accountlab

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Deportees Start Businesses to Overcome Unemployment in El Salvador

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Migration & Refugees

Oscar Sosa cooks roast chicken and pork on an artisanal grill set up outside his small restaurant, Comedor Espresso, in the eastern Salvadoran city of San Francisco Gotera. Like many of the returnees, especially from the United States, he set up his own business, given the unemployment he found on his return to El Salvador. More than 10,000 people were deported to this Central American country between January and August 2022. CREDIT: Edgardo Ayala/IPS

Oscar Sosa cooks roast chicken and pork on an artisanal grill set up outside his small restaurant, Comedor Espresso, in the eastern Salvadoran city of San Francisco Gotera. Like many of the returnees, especially from the United States, he set up his own business, given the unemployment he found on his return to El Salvador. More than 10,000 people were deported to this Central American country between January and August 2022. CREDIT: Edgardo Ayala/IPS

SAN FRANCISCO GOTERA, El Salvador, Jan 10 2023 (IPS) – While grilling several portions of chicken and pork, Salvadoran cook Oscar Sosa said he was proud that through his own efforts he had managed to set up a small food business after he was deported back to El Salvador from the United States.


This has allowed him to generate an income in a country where unemployment affects 6.3 percent of the economically active population.

“Little by little we grew and now we also have catering services for events,” Sosa told IPS, as he turned the chicken and pork over with tongs on a small circular grill.

The grill is located outside the premises, so that the smoke won’t bother the customers eating inside.

It’s not easy, he said, to return home and to not be able to find a job. That is why he decided to start his own business, Comedor Espresso, in the center of San Francisco Gotera, a city in the department of Morazán in eastern El Salvador.

“You come back wanting to work and there aren’t any opportunities. The first thing they see in you is your age; when you’re over 35, they don’t hire you.” — Patricia López

In this Central American country of 6.7 million people, “comedores” are small, generally precarious, neighborhood restaurants where inexpensive, homemade meals are prepared.

Sosa’s, although very small, was clean and tidy, and even had air conditioning, when IPS visited it on Dec. 19.

Skills and capacity abound, but opportunities are scarce

Sosa, 35, is one of thousands of people deported from the United States every year.

He left in 2005 and was sent back in 2014. He worked for eight years as a cook at a Mexican restaurant in the city of Pensacola, in the southeastern state of Florida.

A total of 10,399 people were deported to this country between January and August 2022, which represents an increase of 221 percent compared to the same period in 2021, according to figures from the International Organization for Migration.

The flow of undocumented Salvadoran migrants, especially to the United States, intensified in the 1980s, due to the 1980-1992 civil war in El Salvador that left some 75,000 dead and around 8,000 forcibly disappeared.

At the end of the war, people continued to leave, for economic reasons and also because of the high levels of violent crime in the country.

An estimated 3.1 million Salvadorans live outside the country, 88 percent of them in the United States. And 50 percent of the Salvadorans in the U.S. are undocumented.

Despite the problem of unemployment, Sosa was not discouraged when he returned to his country.

“I feel that we are already growing, we have five employees, the business is registered in the Ministry of Finance, in the Ministry of Health, and I’m paying taxes,” he said.

Obviously, not all deportees have the support, especially financial, needed to set up their own business.

The stigma of deportation weighs heavily on them: there is a widespread perception that if they were deported it is because they were involved in some type of crime in the United States.

A government survey, conducted between November 2020 and June 2021, found that 50 percent of the deportees manage to open a business, 18 percent live off their savings, their partner’s income or support from their family, and 16 percent have part-time or full-time jobs.

In addition, seven percent live on remittances sent home to them, two percent receive income from property rentals, dividends or bank interests, and seven percent checked “other” or did not answer.

Apart from some government initiatives and non-governmental organizations that provide training and funds for start-ups, returnees have faced the specter of unemployment for decades.

Many return empty-handed and owe debts to the people smugglers who they hired to get into the United States as undocumented migrants.

In the case of Sosa, his brothers supported him to set up Comedor Espresso.

He also received a small grant of 700 dollars to purchase kitchen equipment.

The money came from a program financed with 87,000 dollars by the Salvadoran community abroad, through the Salvadoran Foreign Ministry.

The initiative, launched in 2019, aims to generate opportunities for returnees in four municipalities in eastern El Salvador, including San Francisco Gotera.

This region was chosen because most of the deportees reside here, according to Carlos Díaz, coordinator of the program on behalf of the San Francisco Gotera mayor’s office.

But the demand for support and resources exceeds supply.

“There was a database of approximately 350 returnees in Gotera, but there was only money for 55,” Díaz told IPS.

More than 200 people benefited in the four municipalities.

David Aguilar and Patricia López (right) set up their own business, El Tuco King Carwash, after they decided to return to El Salvador. Their business is located in the eastern part of the country, a region where more than 50 percent of returnees live. CREDIT: Edgardo Ayala/IPS

David Aguilar and Patricia López (right) set up their own business, El Tuco King Carwash, after they decided to return to El Salvador. Their business is located in the eastern part of the country, a region where more than 50 percent of returnees live. CREDIT: Edgardo Ayala/IPS

Hope despite a tough situation

Out of necessity, David Aguilar and Patricia López, 52 and 42, respectively, also set up their own business, in their case a car wash, after deciding to return to El Salvador. It’s called Tuco King Carwash.

Like Sosa, they are from San Francisco Gotera. Aguilar left the country in November 2005 and López three months later, in February 2006.

They made the risky journey to try to give their young daughter – six months old at the time, and today 17 years old – a better future.

One leg of the trip was by sea, on the Pacific Ocean off the coast of Mexico.

“I spent 12 hours at sea, in a boat carrying about 20 people, who were all undocumented like me,” Aguilar said.

He added: “The only thing they gave us as lifesavers were a few plastic containers, in case the boat capsized.”

It was in Houston, in the state of Texas, that Aguilar found work in a car paint shop. The experience has been useful to him back in El Salvador, because in addition to washing cars, he offers paint jobs and other related services.

Aguilar and López were not deported; they decided to return because her father died in 2011. They came back in 2012, without having seen many of their dreams come true.

“You come back wanting to work and there aren’t any opportunities. The first thing they see in you is your age; when you’re over 35, they don’t hire you,” López said.

Before embarking on the trip to the United States, she had finished her degree as a primary school teacher, in 2005. But she never worked as a teacher because she left the following year.

“When I returned I applied to various teaching positions, but no one ever hired me,” she said.

Today, their carwash business, set up in 2014, is doing well, albeit with difficulties, because the couple have found that there is too much competition.

But they do not lose hope that they will succeed.

Former Salvadoran guerrilla David Henríquez, deported from the United States in 2019, shows the quality of the disinfectant he has just produced in his small artisanal workshop in San Salvador. With no chance of finding formal employment after deportation, he worked hard to set up his disinfectant business to generate an income. CREDIT: Edgardo Ayala/IPS

Former Salvadoran guerrilla David Henríquez, deported from the United States in 2019, shows the quality of the disinfectant he has just produced in his small artisanal workshop in San Salvador. With no chance of finding formal employment after deportation, he worked hard to set up his disinfectant business to generate an income. CREDIT: Edgardo Ayala/IPS

An ex-guerrilla chemist

David Henríquez, a 62-year-old former guerrilla fighter, was deported in 2019.

During the civil war, Henríquez was a combatant of the then insurgent Farabundo Martí National Liberation Front (FMLN), but when peace came he decided to emigrate to the United States in 2003 as an undocumented immigrant.

With no hope of finding a formal sector job here, he began to make cleaning products, a skill he learned in the United States.

In the 12 years that he lived there, he worked for two years at the Sherwin Williams plant, a global manufacturer of paints and other chemicals.

“It was there that I began to discover the world of chemical compositions and aromas,” Henríquez told IPS during a visit to his small workshop in the Belén neighborhood of San Salvador, the capital.

Henríquez was producing a 14-gallon (53-liter) batch of blue disinfectant with the scent of baby powder. He also makes disinfectant smelling like cinnamon and lavender, among others. His business is called El Dave de los aromas.

His production process is still artisanal, although he would know how to produce disinfectant with high-tech machinery, if he had it, he said, “as I did at Sherwin Williams.”

He used a baby bottle to measure out the 3.5 ounces (104 milliliters) of nonylphenol, the main chemical component, used to produce 14 gallons.

Henríquez dissolved other chemicals in powder, to get the color and the aroma, and the product was ready.

He produces about 400 gallons a month, 1,514 liters, at a price of 3.50 dollars each.

“The important thing is to have discipline, work hard, to shine with your own effort,” he said.

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Digital Treatment of Genetic Resources Shakes Up COP15

The executive secretary of the Convention on Biological Diversity, Elizabeth Maruma Mrema, highlighted on Friday Dec. 16 the results of the Nagoya Protocol on access to genetic resources and fair benefit sharing at an event during COP15 in the Canadian city of Montreal. But the talks have not reached an agreement on the digital sequencing of genetic resources. CREDIT: Emilio Godoy/IPS

The executive secretary of the Convention on Biological Diversity, Elizabeth Maruma Mrema, highlighted on Friday Dec. 16 the results of the Nagoya Protocol on access to genetic resources and fair benefit sharing at an event during COP15 in the Canadian city of Montreal. But the talks have not reached an agreement on the digital sequencing of genetic resources. CREDIT: Emilio Godoy/IPS

By Emilio Godoy
MONTREAL, Dec 16 2022 (IPS)

In addition to its nutritional properties, quinoa, an ancestral grain from the Andes, also has cosmetic uses, as stated by the resource use and benefit-sharing permit ABSCH-IRCC-PE-261033-1 awarded in February to a private individual under a 15-month commercial use contract.


The permit, issued by the Peruvian government’s National Institute for Agrarian Innovation, allows the Peruvian beneficiary to use the material in a skin regeneration cream.

But it also sets restrictions on the registration of products obtained from quinoa or the removal of its elements from the Andean nation, to prevent the risk of irregular exploitation without a fair distribution of benefits, in other words, biopiracy.”The scientific community is willing to share benefits through simple mechanisms that do not unfairly burden researchers in low- and middle-income countries.” — Amber Scholz

The licensed material may have a digital representation of its genetic structure which in turn may generate new structures from which formulas or products may emerge. This is called digital sequence information (DSI), in the universe of research or commercial applications within the CBD.

Treatment of DSI forms part of the debates at the 15th Conference of the Parties (COP15) to the United Nations Convention on Biological Diversity (CBD), which began on Dec. 7 and is due to end on Dec. 19 at the Palais des Congrès in the Canadian city of Montreal.

The summit has brought together some 15,000 people representing the 196 States Parties to the CBD, non-governmental organizations, academia, international bodies and companies.

The focus of the debate is the Post-2020 Global Framework on Biodiversity, which consists of 22 targets in areas including financing for conservation, guidelines on digital sequencing of genetic material, degraded ecosystems, protected areas, endangered species, the role of business and gender equality.

Like most of the issues, negotiations on DSI and the sharing of resulting benefits, contained in one of the Global Framework’s four objectives and in target 13, are at a deadlock, on everything from definitions to possible sharing mechanisms.

Except for the digital twist, the issue is at the heart of the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization, part of the CBD, signed in that Japanese city in 2010 and in force since 2014.

The delegations of the 196 States Parties to the Convention on Biological Diversity have failed to make progress at COP15 in the negotiations on new targets for the protection of the world's natural heritage, in the Canadian city of Montreal. In the picture, a working group reviews a proposal on the complex issue. CREDIT: IISD/ENB

The delegations of the 196 States Parties to the Convention on Biological Diversity have failed to make progress at COP15 in the negotiations on new targets for the protection of the world’s natural heritage, in the Canadian city of Montreal. In the picture, a working group reviews a proposal on the complex issue. CREDIT: IISD/ENB

Amber Scholz, a German member of the DSI Scientific Network, a group of 70 experts from 25 countries, said there is an urgent need to close the gap between the existing innovation potential and a fair benefit-sharing system so that digital sequencing benefits everyone.

“It’s been a decade now and things haven’t turned out so well. The promise of a system of innovation, open access and benefit sharing is broken,” Scholz, a researcher at the Department of Microbial Ecology and Diversity in the Leibniz Institute’s DSMZ German Collection of Microorganisms and Cell Cultures, told IPS.

DSI stems from the revolution in the massive use of technological tools, which has reached biology as well, fundamental in the discovery and manufacture of molecules and drugs such as those used in vaccines against the coronavirus that caused the COVID-19 pandemic.

The Aichi Biodiversity Targets, adopted in 2010 in that Japanese city during the CBD COP10, were missed by the target year, 2020, and will now be renewed and updated by the Global Framework that will emerge from Montreal.

The targets included respect for the traditional knowledge, innovations and practices of indigenous and local communities related to the conservation and sustainable use of biological diversity, their customary use of biological resources, and the full and effective participation of indigenous and local communities in the implementation of the CBD.

Lack of clarity in the definition of DSI, challenges in the traceability of the country of origin of the sequence via digital databases, fear of loss of open access to data and different outlooks on benefit-sharing mechanisms are other aspects complicating the debate among government delegates.

Through the Action Agenda: Make a Pledge platform, organizations, companies and individuals have already made 586 voluntary commitments at COP15, whose theme is “Ecological civilization: Building a shared future for all life on earth”.

Of these, 44 deal with access and benefit sharing, while 294 address conservation and restoration of terrestrial ecosystems, 185 involve partnerships and alliances, and 155 focus on adaptation to climate change and emission reductions.

Genetic havens

Access to genetic resources for commercial or non-commercial purposes has become an issue of great concern in the countries of the global South, due to the fear of biopiracy, especially with the advent of digital sequencing, given that physical access to genetic materials is not absolutely necessary.

Although the Nagoya Protocol includes access and benefit-sharing mechanisms, digital sequencing mechanisms have generated confusion. In fact, this instrument has created a market in which lax jurisdictions have taken advantage by becoming genetic havens.

Around 2,000 gene banks operate worldwide, attracting some 15 million users. Almost two billion sequences have been registered, according to statistics from GenBank, one of the main databases in the sector and part of the U.S. National Center for Biotechnology Information.

Argentina leads the list of permits for access to genetic resources in Latin America under the Protocol, with a total of 56, two of which are commercial, followed by Peru (54, four commercial) and Panama (39, one commercial). Mexico curbed access to such permits in 2019, following a scandal triggered by the registration of maize in 2016.

There are more than 100 gene banks operating in Mexico, 88 in Peru, 56 in Brazil, 47 in Argentina and 25 in Colombia.

The largest providers of genetic resources leading to publicly available DSI are the United States, China and Japan. Brazil ranks 10th among sources and users of samples, according to a study published in 2021 by Scholz and five other researchers.

The mechanisms for managing genetic information sequences have become a condition for negotiating the new post-2020 Global Framework for biodiversity, which poses a conflict between the most biodiverse countries (generally middle- and low-income) and the nations of the industrialized North.

Brazilian indigenous activist Cristiane Juliao, a leader of the Pankararu people, calls for a fair system of benefit-sharing for access to and use of genetic resources and their digital sequences at COP15, being held at the Palais des Congrès in the Canadian city of Montreal. CREDIT: Emilio Godoy/IPS

Brazilian indigenous activist Cristiane Juliao, a leader of the Pankararu people, calls for a fair system of benefit-sharing for access to and use of genetic resources and their digital sequences at COP15, being held at the Palais des Congrès in the Canadian city of Montreal. CREDIT: Emilio Godoy/IPS

Indigenous people and their share

Cristiane Juliao, an indigenous woman of the Pankararu people, who is a member of the Brazilian Coordinator of Indigenous Peoples and Organizations of the Northeast, Minas Gerais and Espírito Santo, said the mechanisms adopted must favor the participation of native peoples and guarantee a fair distribution of benefits.

“We don’t look at one small element of a plant. We look at the whole context and the role of that plant. All traditional knowledge is associated with genetic heritage, because we use it in food, medicine or spiritual activities,” she told IPS at COP15.

Therefore, she said, “traceability is important, to know where the knowledge was acquired or accessed.”

In Montreal, Brazilian native organizations are seeking recognition that the digital sequencing contains information that indigenous peoples and local communities protect and that digital information must be subject to benefit-sharing. They are also demanding guarantees of free consultation and the effective participation of indigenous groups in the digital information records.

Thanks to the system based on the country’s Biodiversity Law, in effect since 2016, the Brazilian government has recorded revenues of five million dollars for permits issued.

The Working Group responsible for drafting the new Global Framework put forward a set of options for benefit-sharing measures.

They range from leaving in place the current status quo, to the integration of digital sequence information on genetic resources into national access and benefit-sharing measures, or the creation of a one percent tax on retail sales of genetic resources.

Lagging behind

There is a legal vacuum regarding this issue, because the CBD, the World Intellectual Property Organization and the International Treaty on Plant Genetic Resources for Food and Agriculture, in force since 2004, do not cover all of its aspects.

Scholz suggested the COP reach a decision that demonstrates the political will to establish a fair and equitable system. “The scientific community is willing to share benefits through simple mechanisms that do not unfairly burden researchers in low- and middle-income countries,” she said.

For her part, Juliao demanded a more inclusive and fairer system. “There is no clear record of indigenous peoples who have agreed to benefit sharing. It is said that some knowledge comes from native peoples, but there is no mechanism for the sharing of benefits with us.”

IPS produced this article with support from Internews’ Earth Journalism Network.

European Court of Justice Ruling on Beneficial Ownership, a Major Blow to the Fight Against Environmental Crimes

By Matti Kohonen
LONDON, Dec 12 2022 (IPS)

The European Court of Justice on November 22, 2022, made a ruling that reversed much of the progress we have made in a decade in the fight against corruption, economic and natural resource crimes, tax abuses and other forms of illicit financial flows across the world. In the ruling, the court declared invalid the part of the European Union’s Anti Money Laundering Directive that allowed public access to registries about companies’ beneficial owners (that is, the real people who own or actually control them).


This has a direct impact in the fight against environmental crimes, particularly illegal, unreported and unregulated (IUU) fishing which is devastating the world’s fisheries resources, accounting for up to one-fifth of global catches.

The financial secrecy surrounding the owners of vessels is a key driver of IUU fishing as secrecy makes it harder to catch the real perpetrators of this illegal trade. In a report published by the Financial Transparency Coalition in October 2022, we discovered that among the top 10 operators of vessels reported to be engaged in this illicit practice, one was based in Spain while a total of 30 vessels were flagged to Italy, making it the highest European flag jurisdiction for IUU fishing. In total, we found that 12.8% of all vessels engaged in IUU fishing were flagged to a European country.

Matti Kohonen

The ECJ ruling makes it impossible for a member of the public to investigate these linkages further. In Spain and Italy, the commitment to open up the registry was made in principle but remains unimplemented. This decision takes all pressure off to implement open beneficial ownership registries in these two countries that are most responsible for IUU fishing in the continent.

This is a welcome present to owners of IUU fishing vessels who often use complex corporate structures to hide their identities and evade punishment. Underscoring this problem, in our investigation we found the individual shareholder data was only available for 16% of industrial and semi-industrial vessels engaged in IUU fishing.

But the ECJ’s ruling impact will be felt well beyond Europe’s borders. Most of the world’s IUU fishing takes place in Africa which loses US$11.5bn in illicit financial flows linked to IUU fishing every year. A significant proportion of this illicit catch in Africa is caught in West Africa, with US$9.5bn losses in this region alone, with much of the fish caught there by foreign fleets ending up in Europe. In total, the European continent imports some US$14bn worth of seafood from the global South each year, making it a key market for seafood products.

The court’s decisions rested on a narrow interpretation of the purpose of the beneficial ownership registry, limited to fighting money laundering and terrorist financing. Fishing related offences are not yet recognised as ‘natural resource crimes’ by the Financial Action Task Force (FATF), the global anti-money laundering regulator, while illegal logging and illegal wildlife trade (IWT) related offences are already included in their definition of what constitutes money laundering. If this were to be upgraded by FATF, we could claim most, if not all, IUU fishing offences as money laundering crimes.

The ECJ decision also rests on a narrow interpretation of the ‘right to private life’ as a fundamental civil right as subscribed in the EU Charter of Fundamental Rights of the European Union that partly lays the legal foundation for the EU. Worryingly, the court did not consider any evidence of the benefits of public access to beneficial ownership information in both fighting money laundering and terrorist financing, let alone the risks that natural resource crimes pose to other rights, such as the right to a healthy environment recognised as a human right by the UN General Assembly in 2022.

Ultimately, the real winners of this ruling are the thousands of companies engaged in IUU fishing and other environmental crimes across the world, and which benefit from money laundering at the tune of billions of euros per year. The ruling undermines collective action to make the money trail of these crimes more traceable, at a time when countries especially in the global South are desperate for funds amid a cost of living crisis and high inflation.

Reacting to the ruling, the European Council signalled that member states should ensure that any natural or legal person demonstrating a legitimate interest has access to information held in the beneficial ownership registers, including especially journalists and civil society organisations as long as they can demonstrate legitimate interest in relation with fighting money laundering and terrorist financing.

However, this is insufficient since this will likely only apply to journalists and civil society in the same country as the registry, and application processes generally take a long time. Also one will need to know the company of interest before accessing any information, blocking the option of looking through public registries to spot risks and red flags.

The EU Parliament should be expected to start negotiations on a new anti-money laundering directive next spring. It must not allow the ECJ ruling to stand, for everyone’s sake.

IPS UN Bureau

 


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Excerpt:

The author is Executive Director, Financial Transparency Coalition Source