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Jim O'Neill, chief economist of Goldman Sachs was speaking yesterday at a videoconference organized by the Federation of Trade of São Paulo (Brazil).
According to him, one of the existing imbalances in the global economy today is that the United States represent 30% of Gross Domestic Product (GDP) overall, but the dollar accounts for 70% of international reserves. "That makes no sense," he said, noting that U.S. currency is more important that the United States.
O'Neill argued that the BRIC countries should use local currencies to trade among themselves. For him, trade among the countries of the group would grow much more if the idea were implemented.
He added that "I believe that the use of local currencies in trade is a sensible ambition,"
According to him, Brazil's main challenge is to increase its presence in international trade and keep inflation and their expectations at low levels. Jim O'Neill was the creator of the term BRICs to describe the group consisting of Brazil, Russia, India and China. he says that Brazil's economy is too tied to domestic consumption, something which weakens the Real against other international currencies. "The real is weaker than the Russian ruble. This is because Brazil has reduced participation in the international economy," he stressed.
He said Brazil is undergoing strong growth in domestic demand, the example of what happens in China. "It seems necessary to set monetary policy and to control prices and that inflation forecasts do not grow too," he suggested. To the economist, the country is reaping the first fruits resulting from a stable economy.
O'Neill cautioned that some of the BRICs, especially China, will have to make adjustments to make this local currencies system work, but he dismissed the views of the director general of the World Trade Organization (WTO), Pascal Lamy, who considers bad idea. "I do not want to circumvent the WTO, but the truth is that Lamy's opinion means nothing," he joked.
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