By Matthew Cowley and Bob Davis
The Brazilian Finance Minister Guido Mantega, again criticized the easy credit policies that are developed in advanced countries and said he will urge the Group of 20 to adopt restrictions on derivatives and hedge funds in the rich countries as a way to reduce global inflationary pressures.
The world is still grappling with the consequences of global financial and economic crisis, which are evident in the divergence between the growth rates of economies advanced and emerging Mantega said in an interview with The Wall Street Journal.
"The main culprit is the delayed recovery in advanced countries and this leads to practice monetary policy is too expansionary," said Mantega. "While advanced countries are not fully recover from the crisis, we have a dispute over markets, particularly of manufactured goods," he said. "Therefore, I would say that the war of currencies continues," he added. Mantega participates in a G-20 meeting and meetings of the IMF and World Bank this week in Washington.
market speculation derivatives for commodities such as food and oil caused the price rise, increasing global inflation, Mantega said. Companies should be able to hedge its exposure to certain currencies, but the volume of derivatives is above the level of transactions, which is attributable to "is speculation, not hedging," he said.
leverage levels should be reduced, and the money aside to secure contracts should be increased at the same time that the contracts should be recorded in a clearinghouse to ensure transparency, he said.
Government Brazil argues that global inflation is the main reason of rising domestic prices, though economists say the growing local demand is also of concern.
Mantega acknowledged that inflation in Brazil could surpass the 6.5% target the government set. This objective is 4.5% with a "tolerance" of two percentage points up or down.
"From a historical standpoint, it is possible that we may be out of the band this year, said Mantega. "But what is important is to look forward to the future."
Thus, unlike many other countries, inflation in Brazil will decline this year, said the minister. Mantega expected inflation of 5.7% this year, down from 5.9% in 2010.
Brazil's government faces a difficult task with high inflation, astronomical interest rates and a currency that is appreciating. Controlling inflation rising interest rates attract more money to Brazil, strengthening its currency and hurts local industry.
Mantega blamed the massive monetary expansion of the advanced countries to create large extent the problem, although he was more sympathetic to China and other Asian countries, he said, manipulate their currencies.
"To we would be better for China and other countries to adopt a floating exchange rate. Global capital flows would have more balance, "he said.
The president of Brazil, Dilma Rousseff, is in China, negotiating trade issues. Mantega said China was sending" signals "that reduced restrictions on entry of Brazilian meat, but Brazil also wants to increase sales of manufactured goods to China.
"We export our industrial goods to China and sell fewer commodities," he said. Although it is in favor of free trade, Mantega admitted that Brazil had to intervene to prevent the currency strengthen too.
"Brazil had managed to adopt a change to prevent disturbances in the economy, which today is well balanced," he said.
The government seeks to discourage capital inflows in the short term capital controls, that the minister understood to have been successful and will continue if needed. But the government has been careful not to limit the entry of money for long-term investments, he added.
"We will not take actions that are worse than what we are trying to remedy. Not worth it. Continue to take very strong actions to continue to break the momentum, the flow," he said.
Government measures real maintained stable during the first quarter, near the level of 1.65 reais per dollar, despite record entries liquid almost U.S. $ 35,000 million. Without controls, the dollar might have fallen to 1.40 or 1.45 reais, calculated.
In late March, however, the real has appreciated to about 1.58 per dollar and investors now expect to be located at 1.55 as it did in mid-2008 before the outbreak of the global financial crisis.
The minister stressed again that the government has no price target for the camp, and warned investors that currencies can move in both directions. "These investors should take care not to bet in one direction only because they might be surprised, "he said.