November 3, 2010 / 11:00 PM / 10 years ago

Brazil says Fed policy impoverishes other nations

BRASILIA, Nov 3 (Reuters) - Brazil said on Wednesday it was worried by the U.S. Federal Reserve’s plan to buy billions more dollars in bonds, saying America’s policy of easy money could lead countries to enact protectionist policies.

With the Fed pledging to keep interest rates low for some time, Brazil is trying to prevent its currency from appreciating, which makes its exports less competitive, as investors dump the greenback and buy emerging market assets in search of higher yields. For details, see [ID:nN03291337].

“(The Fed’s decision) is cause for concern. They are policies that impoverish those around them and end up prompting retaliatory measures,” Brazil’s Foreign Trade Secretary Welber Barral told reporters.

“And then you have this type of cancer, which is protectionism, that spreads very fast,” he said.

He did not say if Brazil would take any action.

Brazil decided to double to 4 percent taxes on foreign investors buying local bonds in an effort to curb the strength of its currency, the real.

The Federal Reserve said it will buy $600 billion more in government bonds by the middle of next year in an attempt to breathe new life into a struggling U.S. economy. [ID:nN03120542]

The heads of three international organizations will warn leaders of the G20 that the world economy faces an increased risk of trade protectionism because of tensions over exchange rates. [ID:nLDE6A22B5] (Reporting by Isabel Versiani; writing by Jason Lange; Editing by Missy Ryan and Editing by Kenneth Barry)

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