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Mexico says G20 to check out smoothing capital flows

6 Mar 2013 | Author: | No Comments »

0603-06MONTEVIDEO (Reuters) – Mexico includes possible steps to blunt the impact of sharp capital flows for the Group of 20’s policy agenda after discussions with Latin American neighbors, Finance Minister Jose Antonio Meade said on Sunday.

Mexico, which sports ths G20’s rotating presidency this current year, hosted a seminar about G20 priorities for the sidelines of meetings of Inter-American Development Bank. The bloc’s only Latin American members are Brazil, Mexico and Argentina.

Meade said via his Twitter account that suggestions on the region would help to enrich the effort of the G20, such as a push to ease the impact of capital inflows and outflows and tools to manage flows better.

One suggestion Mexico would tackle board would have been to “develop a better ability to absorb financial flows in domestic financial systems,” he was quoted saying.

Many delegates with the IADB meeting have expressed concern about a recent move toward protectionism, particularly by Brazil, which yesterday pushed Mexico to curb auto exports within the next four years to boost its industrial sector, hit by an appreciating currency.

Brazil blames loose monetary policy in developed economies for the foreign cash flows that have pushed the real and unleashed a flood of cheap imports, hurting the competitiveness of Brazilian industries.

Officials present for the Montevideo meeting said Uruguay, Paraguay as well as other countries had pushed for Mexico to be sure the G20 addressed currencies and trade barriers.

“Mexico was motivated to raise issues of protectionism, exchange rates and capital flows,” Paraguay Economy Minister Dionisio Borda said.

Meade told Reuters the G20 remained devoted to combating protectionism where there was no intention to switch this.

“In every G20 meeting whatever we have done is reconfirm the promise to combat protectionism, recognizing that is a measure which doesn’t contribute to global growth,” he explained.

In the G20 leaders’ November communiqué, the audience said multilateral trade was essential as a way to avoid protectionism and necessary more exchange rate flexibility.

Protectionism and capital flows weren’t specifically mentioned within the communiqué following the G20 finance ministers’ meeting in Mexico City in March, but Mexico claims one of its G20 priorities is economic stabilization.

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