MercoPress. South Atlantic News Agency

Brazil's foreign trade policy confronts ministers

Brazilian Trade and Development Minister Luiz Fenando Furlan strong criticism of the country's current financial, monetary and Mercosur policies were openly applauded by Brazilian industry and exporters but caused great irritation inside President Lula da Silva administration.

President Lula da Silva and Finance Minister Antonio Palocci, --considered the current administration "strongman"--, made no officials comments on the full page interview of Mr. Furlan with a Sao Paulo newspaper, but leaked to the press their irritation with some of the Minister's statements.

"What most annoyed them was Mr. Furlan attack on the current exchange policy and the fact that the Minister emerged as the spokesman for industry and exporters", wrote O Estado do Sao Paulo quoting Executive sources.

Apparently Mr. Palocci in a private meeting convinced President Lula da Silva to continue supporting the "money market non intervention policy" arguing that the US dollar is loosing ground all over the world, including Brazil.

In his interview Mr. Furlan warned that only next July "will we be able to assess the damage caused by the current inadequate exchange rate policy".

Exporters fully support Mr. Furlan demand that the Brazilian government prop locally the US dollar which had dropped to 2,70 Reales, and push it back to 3 Reales.

A weaker dollar and stronger domestic currency makes Brazilian exports loose competitiveness and are exposed to "cheap" imports from other countries that have not let the US dollar sink.

Last December the Brazilian Central Bank purchased 2,5 billion US dollars in the local money market but "that has been insufficient" said Mr. Furlan who also complained about interest rates, which currently stand at 18%, to keep domestic prices and inflation under control.

"The problem is that a great proportion of Brazilian inflation is caused by public utilities rates under government control, and indexed prices in contracts. Against administered prices, high interest rates are useless".

However apparently Mr. Palocci was satisfied with Mr. Furlan criticism of Brazil's foreign trade policy which so far has been unable to seal a deal with the European Union and the Free Trade of the Americas Association, and insists with giving priority to Mercosur and Argentina.

"Certain sectors of government still don't understand that the big market to open is that of the rich countries. United States imports 1,3 trillion dollars annually and we hardly manage to sell them 20 billion US dollars", emphasized Mr. Furlan.

Further on he criticized Mercosur and the lack of Brazilian reaction to Argentina's measures to limit imports from Brazil.

"Mercosur rules must be reviewed. In eight years there have been no advances, on the contrary every day we experience more transgressions. We can't go on picking up the bill of those in Mercosur who do not invest, don't modernize and simply block all initiatives. The Brazilian market is more important for Argentina than the Argentine market for Brazil", highlighted Minister Furlan.

Foreign Affairs Secretary Celso Amorim currently in Trinidad Tobago for the signing of a trade understanding gracefully said that "at no moment has Brazil disregarded or abandoned rich markets".

In Sao Paulo, Armando Monteiro, president of the National Confederation of Industry backed Mr. Furlán and insisted that "we need to react to the depreciation of the US dollar; exporters are loosing profitability and this should concern the government".

"Last year we didn't send a single trade delegation to United States which is our main individual partner. We must look after the big and rich customers as the United States", pointed out Jose Augusto de Castro from the Brazilian Foreign Trade Association.