Guido Mantega: "World is on the threshold of global trade war"
Brazil Finance Minister Guido Mantega has warned that the world is heading for a "trade war" amidst what he termed currency manipulation by the likes of China and the US, RTT News reported.
Mantega said he was considering more measures to control the appreciation of the local currency, the real, and that he would raise the issue of currency manipulation at the World Trade Organization and other global bodies such as the G20.
"This is a currency war that is turning into a trade war," Mantega told the Financial Times newspaper on Sunday.
He said Brazil's balance of trade with the US had slipped from about a surplus of $15 billion to a deficit of $6 billion since the US introduced loose monetary policy to boost growth.
He criticized the Federal Reserve's $600 billion quantitative easing - the printing of new money to buy up debt - as a strategy to weaken the dollar and boost exports.
Mantega, who first coined the term "currency war" last year, was also critical of China's exchange rate policy and called for a faster revaluation of the yuan.
"The exchange rate is one of the main drivers of economic policy, more so even than productivity," he said.
"Even as the US recovers, they will continue with quantitative easing because deep down it's a trade strategy. This forces countries to defend themselves as best they can," Mantega added.
[Source: APA Economics, Baku, 10Jan11]
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