Brazil Says US Policy is the Source of Rising Prices

Brazilian Finance Minister Guido Mantega censured the world’s so-called rich nations during international financial meetings in Washington, D.C. this weekend, arguing the United States and others in the Global North are trying to “export their way out of the difficult economic situations” by printing new money and keeping interest rates low. According to Mantega, such policies are driving up the prices of oil and food and disproportionately impacting the world’s poor. The New York Times describes the conflict:

“[Mantega’s] strong remarks highlight the challenges the United States and Europe face as they try to change their economic relationship with the developing world. In place of unsustainable borrowing to fuel consumption of imported goods, they would like to sell more goods and services to those countries. The problem is that developing nations, losing business from their best customers, hope to replace sales by increasing domestic consumption — selling to the same customers developed nations are trying to reach.”

There are a couple of principal matters at stake in this increasingly contentious battle. One is the issue of what the principal motor behind rising prices actually is. The US has continued to point its finger at some developing nations, most notably China, for suppressing the value of its currency in an attempt to increase exports. On this issue there had been a sense that Brazil and the US were on the same page – both critical of China’s “undervalued” currency. In fact, Mantega himself coined the term “currency war” last year. As recently as last week, the Brazilian finance minister said that “war” was still on.

But that issue took a back-seat in Washington this weekend as Brazil led an attack on the United States for continuing its expansive monetary policies. As the unofficial spokesman for the developing world, Brazil says such policies have set off speculative capital flows – so-called “hot money” – beginning in the financial center and moving outward. For its part, the US and others insist domestic demand in the developing world must be reined in at the same time.

It’s around this difference that the issue of capital controls enters. In an excellent op-ed in The Guardian last week, Kevin Gallagher and José Antonio Ocampo note some important changes in thinking at the IMF where, for perhaps the first time ever, the Fund recently embraced the idea of capital controls – albeit on a temporary and limited basis. Over the weekend, the Fund’s proposal on capital controls was rejected by Brazil, India, and other developing countries, which argued the IMF plan would still inadequately regulate the source of “hot money.” As Gallagher and Ocampo suggest, the IMF’s recommendation that capital controls be implemented only as a “last resort” and on a “non-discriminatory” basis seems to have particularly irked Brazil.

Other articles on these and similar topics: Triple Crisis on what’s next re: the “currency wars” and the BRICs; Andres Oppenheimer on fears of economic overheating across the region; Mary Anastasia O’Grady has the neoliberal talking points on Brazil’s economic situation; the Economist presents Colombia as an alternative model to Brazil re: the issue of hot money; and the BBC reports on World Bank chief Robert Zoellick’s grave warning to finance ministers in DC this weekend about the fragile nature of the global recovery.

This weekend’s bullet points:

· In Cuba, President Raul Castro, in a speech opening the the PCC’s Sixth Party Congress in Havana Saturday, proposed that Cuban politicians be limited to two five-year terms in office. The New York Times, quoting Castro:

“We have arrived at the conclusion that it is advisable to limit the fundamental political and state offices to a maximum period of two consecutive periods of five years.”

On economic reforms, the Times reports:

“[Castro] praised the expanded opportunities already extended to entrepreneurs; the government has granted 180,000 licenses for small businesses like coffee vendors, fast-food stands and house rentals, with tens of thousands more expected to be issued in the coming months. Yet he appeared to reject as “contrary to socialism” the loosening of rules on buying and selling homes, a change some analysts had speculated was coming.”

Delegates to the Congress continue to meet today before a closing session tomorrow. More from AP.

· In Tamaulipas, Mexican authorities say they have arrested the Zeta operative thought to be the “intellectual and material author” of many of the murders in and around the town of San Fernando. The Latin America Herald Tribune reports, saying Omar Martin Estrada Luna was arrested by Mexican marines over the weekend. The AP has more on the arrest – which appears to have taken place in Ciudad Victoria – noting that it came through the “international exchange of information.” The AP also notes that Tamaulipas state security chief, Brig. Gen. Ubaldo Ayala Tinoco, was relieved of his post by the state’s governor this weekend. Another military man, Capt. Rafael Lomeli Martinez, will take his place.

· More on the Tamaulipas killings themselves from the AP and New York Times. In an editorial this morning, the LA Times says the Tamaulipas massacre should be the impetus for judicial reform in Mexico. And a good video interview on the drug wars, with Institute for Policy Studies fellow and drug policy expert, Sanho Tree, on RT last week.

· Honduran President Porfirio Lobo is working his Supreme Court once again in an attempt to facilitate the return of ousted former President Mel Zelaya back to Honduras. Honduras’s return to the OAS hangs in the balance. AFP reports.

· Meanwhile, a second economic agreement between Honduran oligarch Miguel Facussé and an international body was cancelled last week because of apparent human rights worries. On Thursday, EDF Trading, a subsidiary of the French utility company EDF, announced it was backing out of a biogas project developed by Facussé’s Grupo Dinant corporation in the Aguan Valley. Earlier in the week, Facussé lost a $20 million loan from Germany’s state development bank, DEG, for similar reasons.

· BBC reports on a week of demonstrations in Bolivia that have brought striking teachers and healthcare workers to the streets of La Paz. Workers are demanding a 15% wage increase, which the government says it cannot afford after a recent wage hike of 10%. The BBC calls the protest, organized by the country’s central trade union body (COB), the “worst unrest” President Evo Morales has faced during his presidency. Protestors continue demanding direct talks with the president.

· El Tiempo reports on the recent – and quite entertaining – spat between Colombian President Juan Manuel Santos and his backseat-driving former boss, Alvaro Uribe.

· AP highlights a new statement on Venezuela from the Inter-American Commission on Human Rights. In its annual report, the IACHR condemns what the wire service calls a “growing climate growing climate of hostility against rights groups and non-governmental organizations” in Venezuela.

· BBC reports on last week’s sentencing of Argentina’s last military dictator, Reynaldo Bignone. Bignone, already serving a 25-year sentence for other human rights crimes, was sentenced to life in prison for authorizing additional murders and torture committed during the Argentina’s 1976-1983 dictatorship.

· AP is the latest to highlight remaining human and labor rights concerns over the US-Colombia free trade pact. The New York Times, meanwhile, comes out in favor of the deal.

· The New York Times highlights what it calls an historic “about-face in American policy” as US attorneys in Florida seek the deportation of former Salvadoran General Eugenio Vides. Vides is accused of participating in human rights crimes during El Salvador’s civil war. The NYT: “The case against General Vides is hailed by human rights advocates as the first time a special human rights office at the Department of Homeland Security has brought immigration charges against a top-ranking foreign military commander.” Vides was once considered a close ally of the US in the fight against FMLN rebels. He has been living in retirement in South Florida since 1989.

· AFP reports on the upcoming exhumation of Salvador Allende’s body to determine once and for all whether or not the Chilean president took his own life in 1973 or was killed by Pinochet forces.

· Finally two opinions. Greg Grandin comments on Ollanta Humala’s first-round victory in Peru and prospects for round-two, at Al-Jazeera. And Walter Russell Mead at The American Interest has a very provocative piece on US-Brazil relations. His conclusion: “The major strategic interests of the US and Brazil are so closely aligned that cooperation between the two countries will be one of the building blocks of the new century.” The evidence for that conclusion – historical or otherwise – seems to me to be significantly lacking.