beyondbrics

Last week it was rescuing the eurozone. This week kicks off with Brazil proposing a change to WTO rules that would help escalate the currency war into a full-on trade war.

Guido Mantega, finance minister, floated this one to the FT back in January. Now the country’s diplomats are putting the plan down on paper. As Joe Leahy reports in Tuesday’s FT, Brazil’s development minister believes the time is right for multilateral discussion on the plan – even though it has reportedly met “strong resistance” from the US and China.

Brazil wants the WTO to be given powers to act against countries that are found to have devalued their currencies in a bid to make their exports more competitive.

Any chance of that happening? Martin Wolf, the FT’s chief economics commentator, thinks not. He told beyondbrics: “China would never accept it and the WTO works on consensus. If Brazil applied this on its own, it would suffer retaliation or be taken through the WTO legal procedure, where it would lose.”

Alan Beattie, the paper’s international economy editor, agrees. He reckons the likelihood of such a radical change at the WTO is “close to nil”.

Brazil seemed to take its peers among the Bric countries by surprise last week when officials suggested Brazil, Russia, India China and South Africa should come to the aid of the eurozone by buying the region’s bonds. Mantega publicly supported the idea – only to have it shot down by Russia, India and China.

The same fate surely awaits this latest plan. Brazil’s presence on the world stage has swelled enormously in the past few years. So has its opportunity to take a leading role in world affairs. To squander that opportunity on hare-brained schemes with no chance of success seems wasteful to say the least.

Related reading:
eurozone file, beyondbrics
Trade war looming, warns Brazil, FT