BRICS Denounce Currency Manipulation

By LUIS R. MIRANDA | THE REAL AGENDA | MARCH 29, 2012

In the power shift the world is experiencing today, both the rich nations and the supposed emerging economies are making sure they appear as cohesive groups with common goals. While the Anglo-Saxon bloc has governed over the world for well over a century, the emerging new powers in the underdeveloped regions of the planet are betting on public unity to exercise pressure over the current rulers.

While the dominant European nations and the United States hide behind bailouts to avoid facing the debacle of the banker-sponsored debt crisis, the BRICS want to show the world that there is another way to do things that may be more beneficial for all. Although the birth of the BRICS, a group composed by China, Brazil, Russia, South Africa and India seemed to be a good initiative to bring about economic and perhaps even political balance in the power struggle now occurring, the truth is that the BRICS are an example of what the Anglo-Saxon Empire was 200 years ago: A bunch of wannabe leaders who cannot find significant common ground to create and exercise policies that improve their people’s standard of living, but who do take time to show off their newly acquired insignificant medals.

It is easy to see why the BRICS are simply more of the same. In the latest communique issued by the group, it member countries criticize the United States and Europe for their manipulation of the Dollar and the Euro currencies. This criticism is well founded, but aren’t China and Brazil doing the same thing? They are. China artificially manipulates its currency to keep its value low and with that benefit by keeping the cost of exporting its goods low. Brazil on the other hand, also resorts to currency manipulation to keep the Real at about 1.75 Reais per dollar. Recently, business leaders in Brazil have been lobbying the government led by Dilma Rousseff to further devalue the Real in order for them to be more competitive in the international market. The idea according to these business leaders, is to take the Real to at least 1.85 per dollar, which would allow them to reduce the cost of exporting their products to the European and American markets as well as not having to pay better wages to its workers. In other words, the Brazilian industry is asking the government to tax its people by devaluing the Real, which will increase inflation.

In a previous statement, some members of the BRICS talked about their reservations to denounce currency manipulation because China, one of the most influential members of the group, also engages in such behavior. It was only after China learned about the position of the other member-states and understood that the official communique was meant to criticize Europe and the United States that the document was made public. “Brazil will push for its large emerging-market peers including China to denounce what it sees as unfair monetary policies by Europe and the United States, raising the stakes in a global confrontation over economic imbalances,” reported Reuters on Wednesday. On Thursday, representatives of some of the most influential multinational corporations that operate in Brazil, met with the Secretary of Commerce in the capital city of Brasilia, Brazil to request that the government manipulated the Real in order for those companies to gain an advantage on foreign competitors and international markets.

According to Reuters, Brazil accuses rich nations of using policies to cause a “monetary tsunami” by adopting policies that spread benefits such as low interest rates and bond-buying programs. These policies, according to the report, were designed to stimulate the troubled U.S. and European economies. This is the official explanation, however, the real goal is to cause a massive debt hole from which the global economy cannot come out of. Banking leaders in Europe and the United States are letting the debt crisis collapse in a progressive and incremental way to a point where the artificially created liquidity will not be able to bail nations out. So-called emerging markets like Brazil, are directly or indirectly absorbing the new monies being put out by the banks and large investors — in many cases as loans or investments in infrastructure — in order to hook developing countries into deeper debt and terminate them once their power grab process is completed. This is not reported in the local media or talked about by mainline economists, who believe that the investment is coming in as a result of some magical attraction that the country has, or perhaps because Brazil is governed by a woman, or because the people here are friendly. The few economists who do know about the real intentions the bankers and large investors have in mind do not have the guts to talk about it.

Publicly, the BRICS seem to be led by Brazil, whose Trade and Industry Minister, Fernando Pimentel, believes that although their complaints about currency manipulation and other protectionist policies will not convince powerful countries to stop such policies, it will somehow allow them adopt other protectionist policies they’ve previously denounced including raising tariffs and implement changes in trade and commercial policies at supranational unelected bodies like the World Trade Organization.

A few years ago, when Brazil magically became the target of massive investment no one in this country complained about it, or about currency manipulation or protectionism of any kind. But after the country began to feel the effects of the current global depression, apologists started talk about the external reasons why the country’s economy was tanking. Although Brazil has overtaken the UK as the world’s 6th largest economy, internally the results of such achievement are nowhere to be seen here in Brazil. In fact, Brazilian companies as well as international corporations that operate here are not even close to embracing open markets and free trade — not even among themselves. Instead, they are envisioning future protectionist measures to save themselves from decision made by Europe and the United States. Brazil and Argentina are carrying out a trade war that limits the free flow of products and services. Companies are having to trade smaller amounts of goods in order to get paid smaller amounts of money so that the central banks do not hold payments due to the large volume of the transactions.

“Brazil has blamed the global liquidity glut for making its currency one of the world’s most overvalued. As local industries struggle, its economy grew only 2.7 percent in 2011, below its BRICS peers and down from a blistering 7.5 percent in 2010,” reports Reuters. Meanwhile, Brazilian officials do not recognize that it is their incapacity to govern which caused their industry’s growth to slow down. The country suffers with one of the largest schemes of corruption in the world which results in inefficient production, skyrocketing taxes,  and poor infrastructure which makes Brazil one of the most difficult and expensive places to do do business.

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Luis Miranda is the founder and editor of The Real Agenda. For more of his stories, subscribe to our article feed. You can also follow him on Twitter and Facebook. Email article ideas and insights through the Contact page.