The Latest on Currency: Lula Steps Up at G8

Lula2Gregory Chin
Senior Fellow, CIGI

On the eve of their meeting with the G8, the G5 group of major emerging economies – Brazil, China, India, Mexico and South Africa – discussed the use of their own currencies to settle trade accounts among themselves, Indian Foreign Secretary Shivshankar Menon told reporters. According to Menon, the suggestion to explore this possibility came from Brazilian President Luis Inacio Lula da Silva.

Menon wanted to clarify that this does not mean the G5 having a new currency or alternative reserve currency. China, Russia, Brazil, France, and to a lesser degree India had expressed an interest in the talks between G5 and G8 leaders due on Thursday including debate on seeking long-term alternatives to the US dollar as the global reserve currency. Brazil and China have, of course, already established arrangements to settle a portion of their trade in their own currencies.

In the G5 Political Declaration issued at the end of their meeting on the first day in L’Aquila, “the 5” gave a strong message calling for the “full, immediate implementation of the G20 Summit Declaration of London, with no delay”. The G5 declaration also emphasizes their joint intention to “continue promoting the reform of the international financial system”, and to “establish a new international financial order” that will be “just, fair, inclusive, and well-administered”. The G5 pledged to “dedicate the necessary efforts to resolve the issue of the inadequate representation of developing countries in international financial institutions”, which they added, “must be carried out immediately.”

For added interest, just this morning, China’s stand-in representative, State Councilor Dai Bingguo raised China’s concerns about currency stability and the reform the international monetary system in delivering the official Chinese presentation to the G8-G5 meeting – looking across the room to the US President and those members of the G8 which had resisted putting the currency issue on the agenda. And in case anyone was wondering whether Beijing is waffling on the currency issue, the Chinese official spokesperson confirmed at the press briefing following the meeting that this is the “official position” of the Chinese government, thus overriding earlier attempts from the foreign ministry to downplay the currency debate.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.

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