German Chancellor Angela Merkel replied on Monday to Brazilian president Dilma Rousseff claims that Europe is involved in a “monetary tsunami” arguing that developed countries are very concerned with Brazil’s protectionist measures.Merkel and Rousseff met at Hannover where the Brazilian president was invited to open a high technology event.
Rousseff had slammed expansionary monetary conditions in Europe saying her government may take more measures to stem currency gains being fuelled by “protectionist” policies in rich nations, but dismissed it would impose capital inflow controls.
“We will discuss the crisis and the concerns each of us has. The president mentions a “liquidity tsunami” that is worrying Brazil, on our side we are concerned with the protectionist measures imposed by Brazil”, said Merkel in reference to additional taxes on the import of cars.
Rousseff argued that the developed countries have injected to financial markets the equivalent of 8.8 trillion dollars, which in real terms is “a trade barrier” from the moment it helps to devalue the currencies of those countries.
To protect itself from a “monetary tsunami” unleashed by rich countries, “Brazil as a sovereign nation will take all necessary measures to protect its economy,” she said. An example of the type of measures Brazil can take is the recent increase in the financial transactions tax to limit foreign investment inflows, she said.
On March 1, Brazil extended to three years the maturity of foreign loans affected by a 6% transaction tax. Previously loans of only up to two years were levied at that rate. The Real has rallied 7.4% this year.
Rousseff said policy makers in Europe and the US were seeking to “artificially devalue” their currencies in a bid to stimulate growth. That in turn is causing “extremely toxic” effects in emerging markets.
The depreciation of the US dollar according to the Brazilian government has become a curse for the Brazilian economy since it drastically cuts into the competitiveness of Brazilian companies, making exports dearer and imported stuff much cheaper thus generating a “disloyal competition”.
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this is one of the Economy opinions ...Mar 06th, 2012 - 12:20 pm 0
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