Helping Brazil To Help Itself |
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December 10, 2009
In an effort to stem the appreciation of its currency, the real, Brazil has twice resorted to capital controls. In response to these measures, IMF head Dominique Strauss-Kahn says capital controls are "not something that come from hell", but the IMF won't be recommending them any time soon to remedy the current crisis.
In an effort to stem the appreciation of its currency, the real, Brazil has twice resorted to capital controls. In response to these measures, IMF head Dominique Strauss-Kahn says capital controls are "not something that come from hell", but the IMF won't be recommending them any time soon to remedy the current crisis.
Enough is enough. Given the economic evidence and in the wake of the current crisis, the IMF should change more than its rhetoric and do away with its Washington consensus policies by encouraging Brazil to strengthen its capital controls, not eliminate them.
In some ways Brazil is a victim of its own success. With US and other western interest rates low and concern about the weakening of the US dollar high, investors have flocked to emerging markets. Brazil has been the most attractive, having rebounded much better than most. Brazil started growing again in the second quarter of 2009 and is set to grow by 3.5% in 2009.
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