Brazil is optimistic that a power struggle in the International Monetary Fund will be resolved before an Oct. 31 deadline, a Brazilian government source told Reuters on Tuesday.
The comments come as a tug-of-war between the United States and Europe over how to give more say to emerging markets threatens throwing the IMF in disarray.
"The expectation is that there will be some kind of agreement to resolve this," the source told Reuters. One possibility is to rotate the seats currently held by smaller European countries to give developing nations a chance to chair a seat, the official added.
Emerging economies such as Turkey, which is represented in a constituency of countries by Belgium, have expressed interest in chairing an IMF board seat.
The United States wants Europe to give some of the seats it occupies on the 24-member board of the global lender to emerging market countries to reflect their growing global economic weight.
So far no formal proposal has emerged on how to resolve the issue.
Belgium Finance Minister Didier Reynders said on Sept. 13 it made sense for euro zone members to move to a single seat on the IMF board, but acknowledged it would be politically difficult to convince all countries to approve the plan.
Board officials have warned that unless the sides reach a compromise before Oct. 31, four seats held by India, Brazil, Argentina and Rwanda would be scrapped because they have the least quota shares.
"We've never considered the possibility that Brazil could lose a seat," the source said. "It is politically unacceptable. Imagine the Africans end up with no seat, forty countries without a seat, the whole of Latin America without a seat.
"Imagine only Europeans and Americans at the Fund. That would mean the end of the Fund."
There are concerns in Washington that the IMF might lose its legitimacy if it fails to become fully representative of both rich and poorer nations.
Rising economic powers such as Brazil, China and India have pushed for change at the IMF and other global institutions, which have long been dominated by the United States and Europe.
Europe has balked at the idea of yielding some of the nine chairs it holds on the IMF board, one of the global lender's top decision-making bodies. The board has overseen the approval of billions of dollars in emergency loans for countries hit by the global financial crisis including Greece, Latvia, Romania and Ukraine.
Frustrated with Europe's resistance to yield power, the United States took an unprecedented step on Aug. 6 of blocking a resolution which would have kept Europe's board dominance.
The sides face an Oct. 31 deadline when the mandate of the existing board expires.
While the struggle over board chairs rages on, emerging economies are also pushing for greater voting power, which is determined by their quota shares in the IMF.
Separate negotiations are under way among the IMF's 187 member countries on how to increase the voting power of emerging market economies through membership quotas.
The Group of 20 major developed and developing economies has called for an agreement by the next meeting in November in Seoul, South Korea. "Our focus is on the voting rights," the source added.
