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Brazil Says US, China Both Cause Currency Problems

Some members of the Group of 20 leading and emerging economies say China is causing problems with trade and currencies by manipulating the value of its money. But Brazil's finance minister says the U.S. efforts to stimulate the American economy are causing just as many problems for his nation. The debate comes as finance ministers and central bank governors head for talks on tough economic issues later this week.

A long-simmering dispute over the way China sets the value of its currency will be a key issue on the agenda in Paris on the 18th and 19th of February.

The United States and some other nations complain that Beijing obtains an unfair price advantage for its exports by pushing down the value of its currency. Some economists say China's policy has hurt the economies of both Brazil and the United States.

But in a telephone conference for journalists on Tuesday, Brazilian Finance Minister Guido Mantega said there is no plan for joint action by Washington and Brazil to press China for change. "Brazil is as concerned about the [decline] of the U.S. dollar as it is about the [Chinese currency]," he said.

Mantega says Washington also hurt Brazil when efforts to stimulate the U.S. economy with low interest rates and a massive program to purchase financial assets cut the value of the dollar.

He says low interest rates and weak currencies in developed nations mean investors can get better returns in dynamic emerging nations like Brazil. A flood of foreign investment has sharply raised the value of Brazil's currency, which means Brazilian-made products cost more to foreigners. The higher price hurts the nation's vital export sector.

Commodities like sugar and soy beans are important exports for Brazil, and Mantega says the global price for many commodities shot up 40 percent last year.

Some G20 nations are discussing proposals to limit commodity price hikes. "Brazil totally opposes use of mechanisms to control the prices of commodities or to regulate the price of commodities," said Mantega.

Mantega says limiting commodity prices could actually cut the supply of the affected crops, and make price problems worse. He argues such regulations will keep farmers from responding to high prices by planting more hectares of expensive crops in the hope of making more money. Smaller plantings are likely to mean smaller crops, and tight supplies tend to boost prices.

Previous G20 gatherings have been focused on coordinating policies to ease the financial crisis, and seeking improved regulation to make the world less likely to face such problems in the future.

These and other issues are likely to be discussed in Paris later this week, as top economic officials set the stage for a gathering of presidents, prime ministers and other heads of state next November in Paris.