UNITED NATIONS — Brazilian President Dilma Rousseff criticized the United States and Europe’s handling of the global economic crisis, saying in a speech to the United Nations that a reliance on monetary policy won’t revive world growth and is unfairly hurting emerging markets.
Rousseff, in the opening speech of the U.N.’s 67th General Assembly, said that emerging market currencies have suffered an “artificial appreciation” as a result of the monetary policies adopted by rich nations.
“Developed countries have continually made use of expansionary monetary policies which introduce an element of imbalance in foreign exchange rates,” said Rousseff.
Brazil stepped up its criticism of the U.S.’s monetary stance following the Federal Reserve’s announcement Sept. 13 that it would resume purchasing distressed assets in a bid to revive economic growth.
While not referring to U.S. monetary policy directly, Rousseff said that “protectionism and all forms of trade manipulation should be tackled inasmuch as they provide greater competitiveness in an illegitimate, spurious and fraudulent fashion.”
Protectionism
At the same time Brazil lashes out at the U.S. monetary stance, its own trade policies have come under greater scrutiny. U.S. Trade Representative Ron Kirk this month sent a letter to Brazil’s government complaining about the government’s raising of tariffs on dozens of industrial goods, which he said marked a “protectionist” move that could prompt retaliation.
Finance Minister Guido Mantega last week dismissed Kirk’s criticism as “absurd,” saying that the latest round of the Fed’s asset-buying program, known as QE3, will create more distortions in global trade than Brazil’s trade policies. He said Brazil’s government stands ready to act to prevent the nation’s currency, the real, from rallying in response to the extra stimulus.
“We can’t possibly accept that legitimate trade defense initiatives of developing countries be unfairly classified as protectionism,” Rousseff said today. “It should be remembered that legitimate trade defense measures are enshrined under the norms of the World Trade Organization.”
The real reached a high this year of 1.70 against the U.S. dollar on Feb. 28. Since then, it has slid 16 percent, more than all 16 major currencies tracked by Bloomberg, as the government came to the rescue of industry by raising tariffs, imposing barriers on capital inflows and purchasing dollars in the spot and futures market.
Yesterday, Rousseff met in New York with European Commission President Jose Manuel Barroso to discuss economic conditions in Europe, as well as commercial and political relationships between Brazil and the continent.
In April, on a visit to Germany, Rousseff coined the term “monetary tsunami” to describe the euro zone’s expansionary monetary policy that she said was driving up emerging markets’ currencies and hurting local manufacturers.
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