MercoPress. South Atlantic News Agency

Brazil wants WTO to sanction countries that manipulate their currencies

Ambassador Azevedo: WTO needs a tool to measure money exchange rate imbalances

Brazil’s delegate before the World Trade Organization said he was contacting other members of the organization so that sanctions are imposed on those countries which alter artificial money exchange rates that harm emerging countries, according to reports in the financial newspaper Valor Economico.

“There is a growing perception that money exchange markets distortions is a serious problem but we need to come up with a reply and so it happens many countries don’t like the idea of changes” and are obstructing the creation of instruments within the WTO said Ambassador Roberto Azevedo.

The ambassador made the statement during a meeting of top officials from the powerful industrial lobby, Federation of Industries from Sao Paulo, Fiesp, with academics that created the Observatory for Change at the Economics School from the Getulio Vargas foundation and who argued that the re-valuation of the Brazilian currency is now on its eighth year.

Azevedo said that the WTO has instruments to sanction disloyal trade practices but it needs a tool to help measure the money exchange rate imbalances and that countries harmed by such practices should be compensated since the “money exchange war” once temporary has become “structurally ingrained”.

With a massive inflow of foreign capital attracted by Brazil’s high interest rates and economic prospects as an exporter of much demanded commodities, the local currency has re-valued strongly during the last eight years with peaks of 1.55 Reais to the US dollar. This has had a devastating competitiveness impact for Brazil’s industrial sector and manufactured exports.

Brazil has insistently argued that “cheap money” plus zero or negative interest rates in developed countries has virtually flooded emerging economies with the inflow of capital causing serious cost and competition distortions.

Finance minister Guido Mantega calls the phenomenon the “currencies’ war” and has pointed its finger at the US, China, Korea and several other countries suffering from recession and intent in promoting exports (and surplus production) to the booming commodities-export emerging economies.

Fiesp head of International Relations Roberto Gianetti da Fonseca pointed out that the preferable exchange rate for the Brazilian currency is anywhere from 2.20 to 2.40 Reais to the US dollar.

“The current rate of 2 Reais to the dollar is insufficient: it only helped those factories with some breathing space, but they are not in a sound position. The ideal is for the US dollar to be in the range of 2.20 to 2.40 Reais”, said Gianetti da Fonseca.