Monetary policies in rich countries are putting
emerging economies at risk, Brazilian President Dilma
Rousseff told US President Barack Obama on Monday.
The comments at the high-profile White House meeting come amid growing tension
between developed and emerging economies over the impact of exchange rate
policies on trade, which has led Brazilian officials to recently renew warnings
of a global “currency war.”
Monday marked Rousseff’s
first visit to the White House since taking office in January 2011. The meeting
between the leaders of the Western Hemisphere’s two largest economies comes
just weeks after Rousseff renewed earlier warnings of
a “currency war,” arguing that a “tsunami” of cheap money from countries such
as the US and the 27-member EU bloc is flooding emerging markets and damaging
their export competitiveness.
Speaking to US university
students the next day, the Brazilian President argued that developed countries
should invest more to recover from the crisis, rather than rely excessively on
monetary policy. She also dismissed concerns that Brazil is pursuing
protectionist measures in response to its currency problems.
Rousseff’s comments echoed similar remarks made in March when meeting with German
Chancellor Angela Merkel, during which the Brazilian leader criticised efforts
by European countries to stimulate their struggling economies via low-interest
loans as tantamount to “artificial forms of protectionism.”
Brazil, Russia, India, China, and South Africa,
meeting on 29 March for their annual BRICS summit, similarly criticised rich
countries for their monetary policy, despite initial hesitation by Beijing,
which was reportedly concerned that including language on monetary policy in
the BRICS communiqué could be seen as Brasilia indirectly targeting China’s own
currency policies.
The currency issue has also been a source of
contention at times within the five-country grouping, with tensions simmering
between Brazil and China over the impact of the latter’s rigid valuation of the
renminbi on Brazil’s export competitiveness.
However, Brazilian Trade Minister Fernando Pimentel
sought to dispel concerns that Beijing and Brasilia are still at odds over
currency policy, telling Reuters prior to the BRICS summit that “today’s
[problem] doesn’t have to do with China,” but rather with the dollar and the
euro.
The relationship between currency and trade also
came to the fore at a WTO seminar last month, an initiative that was
spearheaded by Brazil. The symposium was primarily limited to developing a
better understanding of the issues involved and their implications, leaving the
touchy subject of members’ rights and obligations under the WTO agreements for
future discussions.
Brazil was the US’ eighth largest goods trading
partner last year, with US$74 billion in total bilateral goods trade. The US
goods trade surplus with Brazil was $12 billion in 2011, according to figures
from the Office of the US Trade Representative.
Real continues to struggle
The Brazilian economy has been struggling in recent
years to weather the effects of the real’s appreciation, particularly with
regards to its manufacturing sector. Growth slowed to a disappointing 2.7 percent last year, down from 7.5 percent
in 2010.
In response, the South American country has adopted
various measures to protect its domestic industries, such as the extension last
month of an existing six percent financial
transactions tax to overseas loans maturing in up to five years, among others.
However, Brasilia could step up defensive measures
to shield its agrochemical and pharmaceutical industries from foreign
competition, he said.
While Brazil’s efforts to stem the flow of imports
from abroad - including a recent quota imposed on auto imports from Mexico -
have been criticised by some of its trading partners, Pimentel rebuffed
speculation that its measures were WTO-incompatible. “There are always going to
be people complaining and gritting their teeth… but nobody is going to set a
panel against us,” Pimentel told the newspaper.