Monday, January 10, 2011

Brazil Says Currency Wars Are Now Turning Into Trade Wars

We reported last week that Brazil introduced new measures to stop the appreciation of the real currency versus the declining US dollar and they hay have set a floor of 1.60 to 1.65 on the rate.

Brazil now says it will raise the issue of currency manipulation at the World Trade Organisation and other global bodies, stating that the US and China were among the "worst offenders".

Turning into trade wars

Guido Mantega, finance minister:“This is a currency war that is turning into a trade war,”
He added that currency manipulation would be on the G20 agenda this year. Brazil may also lobby to have the WTO define exchange-rate manipulation as a form of veiled export subsidy, which it is.

Brazil’s trade with the US have dropped from an annual surplus of about $15B to a deficit of $6B since the US began is stimulus and QE programs.

Mr. Mantega also said that China’s undervalued currency is distorting world trade:

“We have excellent trade relations with China ... But there are some problems ... Of course we would like to see a revaluation of the renminbi.”

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