China’s policy of undervaluing the yuan will be discussed when Obama travels to Brazil next month for his first meeting with Rousseff since she took office January 1st, said the official, who is not authorized to speak publicly on the matter.
Rousseff, who will visit China in April, created a task force comprised of trade officials, diplomats, businessmen and outside experts to suggest policies to cope with rising Chinese imports.
Among the options is a multilateral agreement between China and Latin American nations to boost manufacturing exports to the world’s second-largest economy, said the official.
Chinese exports to Brazil rose 61% last year to US$ 25.6 billion as a 34% rally by the real against the yuan since the start of 2009 lowered the cost of imports. The US trade deficit with China soared 21% to US$ 252 billion in the January-November period last year.
China overtook the U.S. as Brazil’s biggest trading partner in 2009, as demand for the South American country’s iron ore and soybeans surged.
A survey by Brazil’s National Industrial Confederation published this week shows that one out of four manufacturers face competition from Chinese goods in the local market. In that group, 45% lost market share to Chinese imports, the survey of 1,529 companies, taken October 4 to October 19, showed.
US Treasury Secretary Timothy F. Geithner will discuss bilateral and Group of 20 issues with senior Brazilian officials on February 7 in his first visit to Brazil since taking office in 2009, the Treasury Department said.
Global trade rules under the auspices of the World Trade Organization are powerless for dealing with the competitive edge provided by China’s currency policy, the official said. Brazil’s decision last year to raise tariffs on Chinese-made toys to 35%, the maximum under provisions of the Geneva-based WTO, from 20% hasn’t helped local toymakers, the official said.
Rousseff has signaled she wants to work more closely with the US than did her predecessor Luiz Inácio Lula da Silva. On December 2, she told Washington Post columnist Lally Weymouth she has “great admiration” for Obama, and in her inaugural speech to Congress said she hopes to “deepen” ties with the US.
Obama said during his State of the Union address last month that he will visit Brazil as part of his first-ever tour to South America. He’s also visiting Chile and El Salvador.
The dollar has weakened 3.5% against the Chinese currency over the last two years while Brazil’s real gained 39% against the dollar in the same period.
Rousseff plans to make China’s trade and currency policies a “priority” in bilateral relations between the two countries, Trade Minister Fernando Pimentel advanced last month and Marco Aurélio Garcia the president’s special advisor for foreign policy said Rousseff is as concerned about China’s attempts to keep the yuan undervalued as she is about the weak dollar.