Brazil warns of global trade war

Brazil has warned that the world is on course for a trade war because of what it says is currency manipulation by China, the US and others.

Finance minister Guido Mantega said Brazil was preparing moves to prevent further appreciation of its currency.

He said his government would raise the issue at the World Trade Organization and the G20 group of rich and developing countries.

Mr Mantega was speaking in an interview with the Financial Times newspaper.

“This is a currency war which is turning into a trade war,” Mr Mantega said in his first major interview since Dilma Rousseff took office as Brazil’s new president on 1 January.

He said Brazil’s trade with the US had slipped from an annual surplus of about $15bn (£9.6bn) to a deficit of $6bn because of US efforts to revive its economy through loose monetary policy.

“The exchange rate is one of the main drivers of economic policy, more so even than productivity,” he said.

Mr Mantega added that China’s “undervalued currency” was also distorting world trade.

He has been finance minister since 2006. In September last year he accused some rich countries of deliberately devaluing their currencies to boost exports and make their economies more competitive.

The Brazilian real has increased by 39% against the US dollar in the last two years.

Its value has been going up steadily as Brazil’s economy has grown, making Brazilian exports less competitive.

Brazil has been swamped by a flood of foreign capital that is taking advantage of low interest rates in the developed world to chase high returns in emerging economies, the BBC business reporter Linda Duffin says.

The International Monetary Fund warned in October that some countries appeared to be trying to use their currencies “as a weapon” and the issue of currency manipulation was discussed at the G20 summit in November.

Source: BBC

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