The world could face a full-scale “trade war” if governments keep pushing down exchange rates to boost exports, Brazilian Minister of Finance Guido Mantega said in an interview yesterday.
He also told the Financial Times that Brazil was preparing new measures to prevent further appreciation of its currency, the real, whose continued strengthening threatens the country’s export-led economy.
“This is a currency war that is turning into a trade war,” Mantega told the paper.
The finance minister coined the term “currency war” in September last year, amid a spate of interventions by countries desperate to keep the value of their currencies down and boost the attractiveness of their exports.
WTO
He said Brazil would raise the issue of exchange-rate manipulation at the WTO and other global bodies, accusing China and the US of being among the worst offenders.
“We have excellent trade relations with China ... But there are some problems,” Mantega was quoted as saying.
“Of course we would like to see a revaluation of the [yuan],” he added.
Brazil’s trade with the US had dropped from a large annual surplus in Brazil’s favor to a large deficit due to loose monetary policy in the US in recent times, Mantega said.
His comments came after Brazil’s central bank on Thursday last week took a surprise step aimed at stopping banks taking speculative short positions that the real will continue to rise against the US dollar.
REAL WORRIES
In the interview, Mantega said more such moves were in the pipeline as pressure on the real was now coming from the futures market.
“You can expect more measures on the futures market,” he said.
The strength of the real, which has more than doubled in value against the US dollar over the past eight years, is a source of major concern in Brazil.
It is one of the first challenges faced by the new government of Brazilian President Dilma Rousseff, who took over the reins of Latin America’s biggest economy from former Brazilian president Luiz Inacio Lula da Silva on Jan. 1.
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