Yesterday 01 March 2012, was a fruitful day for economical newspapers to write about Brazil’s new measures to control its national currency appreciate against the US dollar.
Wall Street Jornal quoted Finance Minister Guido Mantega at a press conference about the multi-fronts that Brazilian government has to fight on:
Brazil’s government fought the so-called currency war on multiple fronts Thursday and promised to deploy more regulatory and financial weapons to keep its currency, the real, from appreciating too much against the dollar.
The central banks of the U.S., European Union and Japan have taken actions to increase liquidity in financial markets, and that cash is seeking profitable investment around the world
Finance Minister Guido Mantega promised more steps to prevent the currency from appreciating too fast.
Reuters, with Dilma Rousseff angry face wrote on its website:
Brazilian President Dilma Rousseff slammed rich nations on Thursday for unleashing a “tsunami” of cheap money that was “cannibalizing” poorer countries such as her own, forcing them to act to protect struggling local industries.
Furthermore, Financial Times, which addressed the problem since 2010, wrote
Brazil has declared a fresh “currency war” on the US and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country’s struggling manufacturers.
So it’s a war to survive in crises times. Each country has to protect its manufacturers and products. There is no way to bargain with millions lives, even thought, that Brazil expected to do double GDP (4-4.5%) than Europe or USA (1-2%), but Brazil’s battle to get this growth is not easy at all especially with its grand BRICS partner, No.2 globally, the Chinese Dragon.
Guido Mantega, the Brazilian finance minister, who was the first to use the controversial term “currency war” in 2010, explained it simply:
“When the real appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper and it creates unfair competition for businesses in Brazil”
To understand the war between the R$ and $, Bloomberg explained the recent changes between the two currencies, keeping in mind that $ hit 1.9R$ earlier in September 2011:
The real gained 0.3 percent to 1.7120 per U.S. dollar at 1:22 p.m. in Sao Paulo, after tumbling 1.3 percent to 1.7174 yesterday. It fell as much as 0.5 percent earlier today. The yield on the Brazilian interest-rate futures contract due in January 2013 fell nine basis points, or 0.09 percentage point, to 9.14 percent.
The Brazilians are afraid to lose their huge effort to lift the country economy with a game of currecnies that the USA, Europe and Japan is playing. Finally, Guido Mantega concluded his fears by saying:
The real at 1.50 or 1.60 per U.S. dollar is “bad” for the Brazilian economy.