SEOUL – The global economy will collapse if rich countries don’t buy more goods from developing nations, Brazilian President Luiz Inacio Lula da Silva said on Thursday before the opening session of the G-20 economic summit.
“There is a visible contradiction: on one side we have the emerging economies, including Brazil, taking measures to increase their consumption; and on the other side, the rich countries, which are not consuming – they don’t want to buy, they only want to sell,” Lula said in Seoul.
“If everyone sells, who is going to buy?” he asked rhetorically.
Lula, who is set to leave office Jan. 1 after two four-year terms, repeated accusations that China and the United States are driving down their respective currencies to boost exports rather than bolstering internal consumption to spur job creation.
As the emerging economies together represent only 20 percent of the world economy, they cannot be held responsible for reviving global demand, the Brazilian leader said.
“Regarding the conflict over exchange rates, if we don’t find a solution, this will lead us to protectionism,” Lula said.
Brazilian Finance Minister Guido Mantega, who accompanied the president to Seoul, said China’s policy of holding down the value of its currency is no longer justified now that the Asian nation is a global economic power.
“China needs to increase its internal consumption,” Lula chimed in.
Both men also had harsh words for the U.S. Federal Reserve’s action last week to inject another $600 billion into the financial system.
The Fed’s second round of what is known as quantitative easing is thought likely to drive down the dollar.
“We cannot make decisions thinking only of ourselves, without taking into consideration the impact we can have on other, smaller countries with more fragile economies,” Lula said.
Yet he ruled out putting pressure on Washington.
“I don’t think the U.S. should be pressured, these things don’t work that way,” the Brazilian president said. “The U.S. has taken this step based on its vision of the problem. We will respect them, but at the same time we will ask them to take responsibility, because they’re going to cause harm.”
Acknowledging the failure so far of efforts to end the dollar’s privileged role in international trade, Lula said the search for alternatives must continue.
The dollar, he said, “can’t be the world’s most-used currency when it is issued only by one country.” EFE