Posted by: changholt | February 9, 2011

Weak Yuan as Big a Brazil Worry as Dollar, Rousseff Aide Says – BusinessWeek

Brazilian President Dilma Rousseff is as concerned about China’s attempts to keep the yuan undervalued as she is about the weak dollar, one of her top foreign policy advisers said.

Rousseff will travel to China in April to meet with heads of state from the so-called BRIC economies, which also include Russia, India and South Africa. Trade Minister Fernando Pimentel, shortly after Rousseff took office Jan. 1, said the new government plans to make China’s trade and currency policies a “priority” during talks.

Marco Aurelio Garcia, the new president’s special adviser on foreign policy, said China’s currency policy isn’t a “central” concern for Latin America’s biggest economy.

“We have as many problems with the currency policy of China as we do with the currency policy of the U.S.” Garcia, 69, said in an interview from the presidential palace in Brasilia. “It’s not only China’s currency policies that are loose. The entire world’s policies are loose.”

Finance Minister Guido Mantega said last week that Brazil’s government is ready to take new measures to prevent the dollar from “melting.” The real’s 38 percent gain against the dollar since 2008 has increased concerns Brazilian industry is losing ground to Chinese imports, which benefit from the yuan’s peg to the dollar.

Toy Tariffs

Brazil this month raised to 35 percent from 20 percent tariffs on toys after manufacturers complained they were being hurt by an increase in imports from China.

Garcia said such “frictions” are normal and require diplomatic skill to be resolved, though they don’t pose a risk to a deepening of commercial ties. Record exports of more than $200 billion last year and an overall trade surplus with China are a sign Brazil’s industry remains healthy in the face of internal “distortions” that have fueled currency gains, he said.

“There are always going to be sectors complaining,” he said. “It’s impossible to have a trade surplus in every item.”

The real’s 33 percent gain against the yuan since 2008 is the third-best performance among 17 major currencies tracked by Bloomberg, trailing the Australian dollar and South Africa’s rand. The yuan appreciated 3.6 percent versus the dollar last year, while the Brazilian real rose 5 percent, India’s rupee climbed 4.1 percent and the Russian ruble slid 1.9 percent.

Rousseff will be accompanied to Beijing by representatives of Brazilian businesses who hope to use the state visit to increase exports to China, including the sale of added-value products demanded by its growing urban population, Garcia said.

South-South Ties

Garcia helped found Rousseff’s Workers Party along with former President Luiz Inacio Lula da Silva three decades ago. As Lula’s special adviser on international affairs, he was one of the architects of Brazil’s outreach to the developing world that helped diversify exports and open markets in Africa and the Middle East.

Exports to China rose to $30.8 billion in 2010 from $6.83 billion in 2005, as the Asian country overtook the U.S. as Brazil’s biggest export market. Exports to Africa nearly doubled to $9.26 billion during the same period, as the U.S.’s share of Brazil’s exports fell to 9.6 percent from 19.2 percent.

Rousseff will seek to consolidate Brazil’s international diplomacy and continue placing a priority on relations with the rest of Latin America and other developing nations in Africa, the Middle East and Asia, Garcia said.

“She has made very clear that our foreign agenda isn’t simply a mechanism to project Brazil’s influence in the world but a way to fulfill national goals,” he said.

First Trip

For her first trip abroad since taking office, Rousseff chose to visit neighbors Argentina, Paraguay and Uruguay– partners in the Mercosur trade block–instead of accepting an invitation to partake in the World Economic Forum in Davos, Switzerland, later this month, Garcia said. Instead, Brazil will be represented at the annual gathering of policy makers and investors by officials including central bank President Alexandre Tombini, he said.

“That’s our priority; Davos is an event,” said Garcia. “It’s a world of choices.”

Garcia said the U.S.’s criticism of the granting of decree powers to President Hugo Chavez by Venezuela’s Congress is “impertinent” interference in the country’s politics.

Venezuela’s National Assembly granted Chavez decree powers for 18 months in December, shortly before a new parliament took office with a strengthened opposition large enough to block major legislation.


Arturo Valenzuela, assistant secretary of state in charge of U.S. relations with Latin America, in a Jan. 6 speech called the move “undemocratic” and a possible violation of the Inter- American Democratic Charter.

“I never saw any sub-secretary, secretary of state or any American official mention that every Venezuelan president before Chavez governed with decree powers,” said Garcia.

Chavez has accused the Washington-based Organization of American States, which oversees enforcement of the charter, of interfering in Venezuela’s internal politics, a sentiment echoed by Garcia.

“This could mean that tomorrow we’ll start qualifying specific aspects of the political system of the U.S., Canada and Brazil and establish a sort of ruler” to judge every nation equally, said Garcia. “These situations are always complex.”

via Weak Yuan as Big a Brazil Worry as Dollar, Rousseff Aide Says – BusinessWeek.

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