Dilma Rousseff, Brazil’s president elect, told reporters in South Korea that the devaluation of the dollar has caused a grave problem for the whole world. As a guest at the G-20 summit, Dilma will attend meetings but will not participate. However, she has defended positions that Brazil, in the person of president Luiz Inácio Lula da Silva, will present at the summit.
The Brazilian government has condemned isolated action, such as recently practiced by the United States and China, saying it amounts to protectionism, and disrupts the world economy. Lula and other Brazilian authorities have strongly recommended a commitment by G-20 nations in favor of global action so as to protect world economic equilibrium.
Dilma declared that the recent decision by the United States to buy US$ 600 billion worth of Treasury notes to stimulate the US domestic market, is an example of protectionism. “It is protectionism camouflaged, an effort to protect themselves,” she said.
“The weak dollar policy is a serious matter of concern throughout the world. This is something that has always caused problems. The weak dollar policy transfers the burden of an adjustment in the American economy to other economies,” said Dilma. commenting on the suggestion by Brazil’s minister of Finance, Guido Mantega, to create a basket of other currencies besides the dollar for international transactions,
Dilma said it was one of the ideas for dealing with the present crisis that was on the table and that any final decision would have to be negotiated.
Dilma reported that she had met the South Korean minister of Transportation, Jong-Hwan Chung and that they discussed the high-speed train planned to run between Rio de Janeiro and São Paulo. “The Koreans are interested in construction projects in Brazil and will be welcome. They have lots of experience in building airports,” she said.
As the curtain came down on the Seoul G-20 meeting, Brazil’s Finance Minister, Guido Mantega, told the media that progress had been made. He highlighted the fact that the president of the United States, Barack Obama, responding to criticism (by Brazil and other countries) that he was threatening global economic stability with policy decisions to strengthen the US domestic economy (quantitative easing, for example, that flooded world markets with cheap dollars), had promised to take into consideration differences in the situation of different countries – the rich nations and the emerging nations and their economic situation.
Mantega said the final document to come out of the meeting consisted of commitments rather than explicit recommendations. “It is, however, recommended that currency manipulation be avoided,” said the minister. “Everybody signed on. The G-20 is where you have to compromise.” That means that Germany will have to fall in line, as well, he declared.
And “macroprudence will be essential to avoid eventual problems and crises in the future. Emerging economies will be able to control excessive inflow of capital – that is a step in the right direction that is an innovation, explained the minister.
In summing up the results of the summit, Mantega said that although the crisis is not over, the most important thing at the G-20 was an agreement to avoid letting things get worse.
The policy of everybody for himself, it was agreed, is counterproductive, said Mantega. Countries will present balance sheets, something Mantega said the Chinese initially resisted, but all finally agreed to. “That will make it possible to analyze the situation by monitoring current accounts,” he explained.
At his arrival in Seoul, Brazilian president Luiz Inácio Lula da Silva declared that he was in the mood for negotiations, not for a fight. “I’m too old to rumble,” he said when asked if he was going to take on the United States and other countries that have recently made unilateral decisions that have aggravated the currency war. “I have come to negotiate.”
Lula was met at the hotel by the president elect, Dilma Rousseff, and the minister of Finance, Guido Mantega. He faces jet lag and a very busy agenda. The eleven hour difference between Seoul and Brasilia was probably eased by a two-day stopover in Mozambique, but not much.
Lula had a surprise encounter at the airport: a nine-year Brazilian boy whose father works in a multinational in Korea. Fabio Schneider told Lula he wants to be president of Brazil someday and improve the country.
This is Lula’s last G-20 summit and the president has said his personal feeling is one of mission accomplished. He said his greatest challenge was to elect the successor he wanted. And that was done and the new president elect of Brazil, Dilma Rousseff, was at his side in Seoul.
He said he was cheering for her to set up a good administration and to have even more success than he has had. As for the future, Lula said he intends to continue negotiating somewhere, but did not say exactly where.
With regard to the G-20 and his colleagues there, he said they will not miss him. “I’m not worried about that because I’m sure Dilma will do an even better job here.”