Monday, September 19, 2011

Brazilian rescue plan sparks surprise

When Guido Mantega, Brazil’s finance minister, suddenly proposed a “Bric” rescue package for the eurozone this week, he caught not only other world leaders by surprise but also many of his fellow countrymen.
Even as officials from other members of the so-called Bric grouping – Russia, India and China – said it was the first they heard of the idea, many ordinary Brazilians expressed shock at the notion of bailing out the world’s richest trading bloc.

After all, with gross domestic product per head of about $10,900 last year, the idea of Brazil bailing out countries such as Italy, whose GDP per head is three times higher, is galling for many Brazilians, who are struggling with high inflation and high taxes.

“Brics helping Europe to maintain its fat welfare state? Please count me out!” said Frederico Perin, owner of a language learning website.
Any co-ordinated Bric action on the eurozone crisis would mark a significant moment for a grouping that has exhibited little coherence on international policy, despite being united by a catchy acronym.
Sceptics, however, doubt that the eurozone will be the issue that changes this. So far details of the proposed discussions on a bail-out remain sketchy, with Mr Mantega saying only that senior Bric officials would broach the matter at a meeting on Thursday.

The Brics, plus South Africa, hold a combined $4,450bn in foreign exchange reserves but $3,200bn of that, or 72 per cent, belongs to China.
China’s reserves are managed under a set of relatively strict criteria and do not represent a piggy bank that Beijing can dip into at will.

Even if China were in a position to shift some of its reserves into peripheral European bonds there is no clear argument why it should, especially when other European countries, such as Germany, appear unwilling to do so.

Some prominent Chinese economists have asked why China should invest in a currency which may not exist a few years and why hundreds of millions of poor Chinese, who lack access to even basic social services, should pay for rich Europeans to retire early. 




No comments:

Popular Posts

New York Time

Copyright 2017 ©
Netvision SA and PlanetM
New York, New York, USA 10008
You can copy this content without permission but you must notify us via email.
Otherwise, it is illegal. All rights reserved worldwide
Updated by Carlos Vassallo

Total Pageviews last month