by James M. Roberts, Ryan Olson
The Heritage Foundation
October 18, 2013
In 2010, Brazil’s Finance Minister, Guido Mantega, publicly declared the advent of the “currency wars.” The battlefields of these conflicts were to be the world financial markets, as emerging economies would have to fend off “hot money” flows that would overvalue their currencies. By branding the United States and other developed nations “enemy combatants” in this financial conflict, Mantega ignored the roots of his country’s own economic problems. As the research presented in this Heritage Foundation Special Report demonstrates, quantitative easing (QE) and the “hot money” it spawned certainly had some role in the appreciation of Brazil’s currency, the real, over the past few years. However, it appears that the most important factors driving the currency appreciation in commodity-exporting countries were the commodity markets themselves. It is time for Brazil to address the fundamental structural problems that are holding back its economy.