Brazil Said to Support U.S. Tapering at G-20 Summit Next Week

Brazil’s government will express support for U.S. monetary tapering at next week’s Group of 20 summit in Australia, saying emerging markets have tools to deal with the potential impact, according to a government official.

Markets already have made the bulk of adjustments to tapering, which U.S. policy makers communicated well, said the Brazilian official who is involved in preparations for the summit and asked not to be named because he was not authorized to comment publicly. Brazil’s government criticized the Federal Reserve’s monetary easing and is being consistent now that it supports its policy to tighten, the official said.

Policy makers in developing nations including India central bank Governor Raghuram Rajan have warned the Fed and other major central banks are fanning turmoil by failing to account for the impact of their policies on other countries. The seven major Latin American currencies tracked by Bloomberg depreciated last year as speculation increased tapering would cause capital to flee emerging markets.

Brazil’s Finance Minister Guido Mantega as late as February last year said loose monetary policy in rich countries was fueling a “currency war” that hurt exporters as capital inflows caused the real to appreciate.

Prevent Volatility

The currency has since weakened, plunging 18 percent in the past 12 months while prompting Mantega on Sept. 18 to say any plans in the U.S. to sustain its stimulus may help prevent volatility.

Some policy makers have since adapted to Fed tapering, with Australian Treasurer Joe Hockey saying in a Feb. 13 interview that the world had to learn to wean itself off loose monetary policy in developed nations.

Brazil’s central bank just hours after the Fed said Dec. 18 it would trim trim monthly bond purchases announced it would extend to at least June a program to stem declines in the real. The currency has depreciated 1.1 percent this year to 2.3889 per dollar after falling 13 percent in 2013.

Brazil will rebut attempts by rich economies to blame developing nations for the emerging market sell-off and expects Australia, which hosts the summit, to focus the discussion on ways to consolidate world economic growth, the official said. The South American country’s widening current account deficit had helped fuel the global economy as imports increase, he said.

The world’s largest emerging economy after China, Brazil last year posted its worst trade balance since 2000 as exports rose 6.5 percent on a daily average while exports declined.

Central bank chiefs and finance ministers from G-20 nations are scheduled to meet in Sydney Feb. 22-23.

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