MercoPress. South Atlantic News Agency

Brazil demands greater role for emerging economies

Brazil's Lula da Silva on Saturday demanded that major reforms of the international financial system include strong input from large emerging nations and said the collapse of modern banking structures is victimizing the world's poor.

"Those who have the least stand to lose the most from a credit crunch that has slammed businesses from Brazil to China", said the Brazilian president addressing the Finance Ministers and Central Bank presidents from the world's 20 major economies, meeting in Sao Paulo ahead of the November 15 summit in Washington. "This system collapsed like a house of cards that dragged down with it the dogmatic faith in the principles of non-intervention by the state in the economy" said Lula da Silva. In closed-door talks, leaders also discussed ways for nations to boost government spending to counter a global slowdown that could lead trade to contract next year for the first time since 1982, said World Bank President Robert Zoellick. Chinese officials in particular discussed a strong fiscal expansion, Zoellick said. Millions of people in developing nations are suffering from a worldwide credit crunch that started in the US and Europe and has spread to rapidly growing emerging market nations. In Brazil, farmers are now are planting less soy, and corporations are cutting output of iron ore, steel, automobiles and other products, said Lula da Silva. After lending by shaken US and European banks slowed, foreign investors sold off emerging market assets, forcing extreme measures by governments including Brazil's to prop up sagging currencies and provide credit lines to companies. Lula da Silva complained that "foreign investment funds are withdrawing their assets in the capital markets of emerging countries to cover the losses they sustained in advanced markets" and this loss of funds "affects balance of payments and makes it difficult for companies to finance themselves". Brazil and other emerging-market nations have long complained their representation in the multilateral organizations such as IMF and World Bank is insufficient, and on Saturday the Brazilian president said the G-20 is better positioned to forge new international financial regulations, because it more broadly represents both rich and developing countries. "We need a new, more open and participative governance" said Lula da Silva. "This is not the moment for narrow-minded nationalism or of individual solutions." Washington supports giving Brazil and other developing nations a significant role, said David McCormick, the US Treasury Department's undersecretary for international affairs. G-20 includes the world's leading economies, UK, US, France, Canada, Germany, Japan, Italy, the European Union and twelve emerging countries: Brazil, Russia, India, China, Argentina, Australia, Indonesia, Mexico, Saudi Arabia, South Africa, Korea and Turkey. They represent two thirds of the world trade and global population and 85% of the world's GDP.