Luiz Inácio Lula da Silva, the president of Brazil, called this weekend for coordinated action among countries in general and developed nations to fight the international financial crisis. "This is a global crisis, it requires global solutions," said Lula at the opening of the meeting for ministers of Finance and central bank governors of the G-20.
"Now is the time to formulate proposals for a substantial change in the global financial architecture," he stated.
The president said that the crisis emerged in nations with advanced economies, therefore those nations must take initiatives for coordinated international action. He asserted, however, that emerging countries must play an active role in formulating and implementing solutions.
"The G-7 is not in a position to see this process through by itself," he declared, alluding to the group of the world's seven wealthiest nations.
To him, now is the time for more open and participative "governance," "and Brazil is ready to take on this responsibility." "This is not the time for individual solutions," said Lula, who stated that a "pact" must be made among governments in order to create this new international financial architecture.
"Multilateral institutions must adapt themselves to a new reality, with greater participation from emerging countries," he said. The guidelines for the "new architecture," according to Lula, must be: representativeness and legitimacy of international regulatory organizations, collective action, good governance, credit incentives, improved regulation, supervision and assessment of global market risk, transparency, and the seeking of financial balance by governments in their respective countries. "The political responsibility of each country must not cause harm to others," he said.
According to the president, the G-20, which is comprised of the wealthiest nations and the emerging economies, can make an important contribution to this process due to its relevance. "The overcoming of the crisis depends on cooperation among these two blocs, with input from the international community," he stated.
To Lula, the time has come for political action. "The crisis was born out of blind faith in the capacity of markets to regulate themselves and, to a great extent, out of lack of control over financial agents," he claimed.
"This system tumbled down like a castle of cards and, along with it, dogmatic faith in the principle that government must not intervene in the economy. Many of those who abhorred such interventions are now desperately calling for help from the government," he said.
According to the president, his main concern is the threat of a global recession leading to job losses and increased poverty. "We cannot allow the panic that has gripped various areas to reach the productive sectors," he said. "It is up to us, global leaders, to show responsibility and serenity, and not let ourselves be contaminated with fear," he claimed.
Lula asserted that the developed nations and the International Monetary Fund (IMF) must implement measures in order to restore liquidity to international lines of credit, as the shortage of foreign funding affects the balance of payments in many countries.
The president also stated that the crisis damages trade, because wealthy countries start lowering their imports, therefore the emerging ones lower their exports. He claimed that protectionism in finance and trade must be avoided, because the example of the crisis of 1929 shows that this type of action will lead to an even greater depression.
In that respect, Lula said that "now is the moment for a final boost in the Doha Round for the liberalization of global trade. "Greater openness is an excellent antidote to the crisis," he said.
"The round is no longer an option, it is a necessity. There is a good set of proposals on the table, and we must address the problems with grandeur. The wealthy countries must not increase their demands on emerging nations," he stated.
To him, "human lives" are at stake and billions of people expect global leaders to be up to the challenge of facing the crisis.
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