Agro Perspectiva

BRICS struck by 'currency tsunami'

13.04.2012 09:14 "Agro Perspectiva" (Kyiv) — The BRICS countries are sustaining losses as a result of the US cheap dollar policy. A statement to this effect was made by Brazilian President Dilma Rousseff following her meeting with President Barack Obama. In her opinion, the so-called ‘tsunami’ of cheap money which jeopardizes the economic growth of the developing countries can be averted only by creating a development bank and through mutual crediting in national currencies. The Voice of Russia’s Polina Chernitsa, Alexandra Dibizheva report. Low interest rates and the policy of quantitative easing which means infusion of dollars into the economy, lead to a drop in the dollar exchange rate. These methods, used by the US Federal Reserve, are designed to spur US exports but damage other countries’ exports, Dilma Rousseff said. Reports say that the Real has gone up in value by more than 30% over the past 18 months. Brazil’s Finance Minister Guido Mantega has described this process as a currency war. In his words, the European authorities are resorting to the same methods — depreciating the euro in order to help their economies cope with the crisis. BRICS leaders have demanded more than once that the US and Europe do away with the cheap dollar policy, which runs counter to the international law. Professor Maxim Bratersky of the High School of Economics gave this opinion in a Voice of Russia interview: «What is happening is nothing new. During the Second World War some countries chose to devalue their currencies in order to gain a competitive advantage for export. The International Monetary Fund is expected to fight these trends. However, when it comes to the US, it steers clear of it. During the G20 summit in Seoul the BRICS countries asked the US not to unleash so many dollars into the global economy. Washington remained deaf to the request. Evidently, its domestic economic problems come first.» Russia was the first to announce that no one would help us but ourselves. Other countries backed this opinion. The recent summit in New Delhi became a pivotal point for planning specific steps in this direction. Maxim Bratersky comments. «The decisions of the summit stipulate a number of joint measures which include the creation of a development bank and the signing of an agreement on mutual lending in national currencies. Before that, Russia and China clinched a bilateral agreement on payments in national currencies. Russia has signed a similar agreement with Turkey.» Brazil became one of the initiators of founding a South-South development bank which would accumulate the resources of the BRICS countries and channel them to various projects. A bank of this kind would protect the BRICS group against the monetary policies of the developed countries and would secure extra economic benefits for the developing countries. Maxim Golovin of the Institute of Economy of the Russian Academy of Sciences gives this opinion: «The bank’s founding countries will thereby enhance their economic partnership and increase their weight in the global financial system, for example, by granting financial resources to less developed countries. Naturally, the developed countries might express concerns. However, the role of the developing countries is too significant not to be reckoned with. This means that we’re bound to see a new balance of strength.» World Bank President Robert Zoellick has supported the proposal. And luckily for BRICS, IMF Managing-Director Christine Lagarde has pledged to give BRICS countries more voting power in the IMF by the end of April.