Brazil Seeking WTO Talks on Measures to Regulate Currency Exchange Rates
Brazil called on the World Trade Organization to allow its members to protect their industries from trade imbalances prompted by currency fluctuations.
The Foreign Ministry said global rules protecting against unfair trade practices date from when most exchange rates were fixed. Mechanisms including anti-dumping and safeguard mechanisms, as well as retaliation rights, need to be updated to deal with “steep fluctuations in exchange rates,” the ministry said in a statement yesterday.
While Brazil’s proposal presented to the Geneva-based WTO yesterday didn’t specify which countries it believes are keeping their currencies undervalued, the move comes as President Dilma Rousseff has intensified efforts to protect manufacturers from cheaper imports from China, whose exchange rate is pegged to the U.S. dollar. Last week, the government raised by 30 percentage points a tax on cars with a large percentage of imported parts after Chinese-made car imports surged.
Manufacturers in Latin America’s biggest economy are being hurt by a 29 percent rally in the real since the end of 2008, more than all 25 of the biggest emerging market currencies tracked by Bloomberg except the Chilean peso. Since October 2010, Brazil has also increased taxes on capital inflows and stepped up dollar purchases to defend Brazil from what Finance Minister Guido Mantega has called a “currency war.”
The real plunged yesterday to a one-year low, cementing its status as the worst performer among major currencies this month, as the European debt crisis compounded government measures to weaken the currency.
The real declined 3.6 percent to 1.7976 per dollar from 1.7331 on Sept. 16. On July 26, the currency closed at 1.5391 per U.S. dollar, its strongest level since January 1999.
Brazilian imports increased 29 percent to $147 billion dollars in the first eight months of the year, while exports, spurred by an increase in commodity prices, jumped 32 percent to $167 billion.
Purchases of foreign cars, Brazil’s second-biggest imported good, jumped 45 percent to $7.4 billion in the same period. Total imports from China have surged 35 percent so far this year, to $21 billion.
To contact the reporter on this story: Andre Soliani in Brasilia at asoliain@bloomberg.net; Adriana Chiarini in Rio de Janeiro at achiarini4@bloomberg.net
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.
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