* NOVEMBER 3, 2010, 12:47 P.M. ET
Brazil Leaders Pledge Action On Currency, Interest Rates
By Matthew Cowley and Tom Murphy
Of DOW JONES NEWSWIRES
SAO PAULO (Dow Jones)--Citing what they called a global "currency war," Brazil's president and president-elect Wednesday pledged action to keep the country's exports competitive while also pulling down the nation's sky-high interest rates.
"Everyone except China and the United States realizes there's a currency war going on," President Luiz Inacio Lula da Silva told reporters at a televised news conference from the presidential palace in Brasilia. "We will take all the steps necessary to make sure our currency is not overvalued."
Lula is due to leave office Jan. 1, turning over the presidency to hand-picked successor Dilma Rousseff. They are both members of the left-leaning Workers' Party.
At the same news conference, Rousseff said, "The last time there was a competitive devaluation of currencies it ended up where it did, in the Second World War."
The Lula administration has already taken a number of steps to stem what Finance Minister Guido Mantega has called "an unwanted appreciation" of the Brazilian real.
The real has gained more than 30% against the U.S. dollar since March 2009. The strong real hurts Brazilian exports, while encouraging cheap imports that undermine the nation's manufacturers. To date, measures have concentrated on tax hikes over short-term investment inflows.
Lula said he will attend the Group of 20 meeting in South Korea Nov. 11-12, accompanied by Rousseff. "We will fight for Brazil's interests on the currency front," Lula said. "They'll have to face two of us this time!"
One factor that has made Brazil a magnet for foreign investment, much of it unwanted, is sky-high interest rates. Brazil's Selic base rate is a towering 10.75%.
Rousseff said her economic advisers will study ways to "bring rates closer into line with world markets." Base rates in many industrialized countries are close to zero, while most developing countries have rates in single digits.
In Brazil, many economists have called for a cut in interest rates as the best way to end the unwanted appreciation of the real.
Rousseff also touched upon other priorities for her upcoming administration. She said improving health care and beefing up public safety will be major concerns.
She reiterated her commitment to extending the government's family assistance program, and said she would push forward with key infrastructure projects, including the proposed bullet train linking Sao Paulo and Rio de Janeiro, Brazil's two biggest cities.
She pledged a concerted effort to push remaining oil regulation bills through congress. Earlier this year, the Lula administration presented a package of legislation designed to promote development of vast offshore reserves. Portions of the package have been passed while others still require congressional action.
Asked about funding for programs, Rousseff said she has no plans to revive the CPMF financial tax, which was voted down by Congress in 2007 in one of the biggest setbacks in Lula's presidency. Rousseff said, however, that she will discuss sources of funding with state governors and congressional leaders.
Rousseff said she will take a short vacation and will be back to work Monday. She added that the process of choosing cabinet and staff members "has not matured" to the point where she is ready to announce any names.
"When the time comes, I will announce names in groups, not one by one," she said.
Brazil Leaders Pledge Action On Currency, Interest Rates
By Matthew Cowley and Tom Murphy
Of DOW JONES NEWSWIRES
SAO PAULO (Dow Jones)--Citing what they called a global "currency war," Brazil's president and president-elect Wednesday pledged action to keep the country's exports competitive while also pulling down the nation's sky-high interest rates.
"Everyone except China and the United States realizes there's a currency war going on," President Luiz Inacio Lula da Silva told reporters at a televised news conference from the presidential palace in Brasilia. "We will take all the steps necessary to make sure our currency is not overvalued."
Lula is due to leave office Jan. 1, turning over the presidency to hand-picked successor Dilma Rousseff. They are both members of the left-leaning Workers' Party.
At the same news conference, Rousseff said, "The last time there was a competitive devaluation of currencies it ended up where it did, in the Second World War."
The Lula administration has already taken a number of steps to stem what Finance Minister Guido Mantega has called "an unwanted appreciation" of the Brazilian real.
The real has gained more than 30% against the U.S. dollar since March 2009. The strong real hurts Brazilian exports, while encouraging cheap imports that undermine the nation's manufacturers. To date, measures have concentrated on tax hikes over short-term investment inflows.
Lula said he will attend the Group of 20 meeting in South Korea Nov. 11-12, accompanied by Rousseff. "We will fight for Brazil's interests on the currency front," Lula said. "They'll have to face two of us this time!"
One factor that has made Brazil a magnet for foreign investment, much of it unwanted, is sky-high interest rates. Brazil's Selic base rate is a towering 10.75%.
Rousseff said her economic advisers will study ways to "bring rates closer into line with world markets." Base rates in many industrialized countries are close to zero, while most developing countries have rates in single digits.
In Brazil, many economists have called for a cut in interest rates as the best way to end the unwanted appreciation of the real.
Rousseff also touched upon other priorities for her upcoming administration. She said improving health care and beefing up public safety will be major concerns.
She reiterated her commitment to extending the government's family assistance program, and said she would push forward with key infrastructure projects, including the proposed bullet train linking Sao Paulo and Rio de Janeiro, Brazil's two biggest cities.
She pledged a concerted effort to push remaining oil regulation bills through congress. Earlier this year, the Lula administration presented a package of legislation designed to promote development of vast offshore reserves. Portions of the package have been passed while others still require congressional action.
Asked about funding for programs, Rousseff said she has no plans to revive the CPMF financial tax, which was voted down by Congress in 2007 in one of the biggest setbacks in Lula's presidency. Rousseff said, however, that she will discuss sources of funding with state governors and congressional leaders.
Rousseff said she will take a short vacation and will be back to work Monday. She added that the process of choosing cabinet and staff members "has not matured" to the point where she is ready to announce any names.
"When the time comes, I will announce names in groups, not one by one," she said.