Weekly Report - 15 November 2005

BRAZIL | Downside of China links emerges. Fiesp, the federation of São Paulo industrialists, has been outlining in congress what it sees as the downside of the recent moves to establish closer commercial ties with China. It notes that the industrial trade balance has shifted from a surplus of US$101.5m in 2002 to a deficit of US$2.1bn at present. Two things are responsible for this, says Fiesp president Paulo Skaf. The first is Brazil's decision to acknowledge China as a 'market economy', which greatly reduces the range of measures available to counteract dumping by Chinese exporters. The second is exchange-policy asymmetry: while the Brazilian currency is over-valued, that of China is under-valued. The ministry of development, industry & trade says that recognition of China's status as a 'market economy' remains contingent upon fulfilment of a Chinese pledge to increase imports of Brazilian industrial goods.

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