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G20 Requests Strengthening of the IMF, World Bank, FSF

Report on the final press briefing, Sao Paulo, November 9, 2008
[Portuguese version]

Brazilian Finance Minister, Guido Mantega, said this Sunday (11/9), after the G20 meeting, in São Paulo, that the emerging countries concluded there is no need to create a new institution to establish policies to be adopted by the international financial system. They decided it is best to strengthen the existing ones – The International Monetary Fund (IMF), The World Bank and the Financial Stability Forum (FSF). “The position of G20 is that the crisis demands change in these organisms, with the creation of new mechanisms for financial regulation and better coordination.

The G20’s president, Mr Mantega, said that the G20 is a strong candidate TO coordinate actions against the crisis, due to the importance the emergent countries have attained in the last ten years. "The IMF, the World Bank and the FSF can contribute to battle the crisis as long as they are strengthened and allowed more participation in the decisions of groups formed by advanced countries, such as the G7 and G8," he said.

Mr Mantega spoke at a press conference about the consensual issues among the members of G20. According to him, everybody agrees that, differently from what happened during the Asian crisis, in the 90’s, the current one which originates from the most advanced nations "placed all the nations in the same boat" and now coordinated actions are needed to face the financial global turbulence. He reinforced that more decision power to the emerging countries in international organizations is necessary because these countries are now responsible for 75% of the global economy growth. "That’s why G20 must play a more representative role as a more relevant institution."

Other consensual points were that nations should adopt anti-cyclical fiscal and monetary policies to face the financial crisis, and that the advanced countries must help emergent nations that lost liquidity with capital flight.

Concerning monetary policies, the central banks manifested apprehension in regard to inflation, and defended that the crisis related measures should not threaten emergent nations’ monetary balance. According to Mr Mantega, on the other hand, the G20 discussed the dangers of deflation caused by capital flight. "Although it’s a temporary movement, there was a currency depreciation and a tendency of deflation."

Mr. Mantega did not detail the propositions that will be taken to the G20 Summit in Washington in November 15th with the participation of chiefs of state. He explained that today’s and yesterday’s meetings had a political outline, and that during the weak a technical group will prepare a schedule of actions. "The propositions will now be discussed in technical terms and the groups will work to elaborate a schedule to carry out these procedures."

The Brazilian minister also declared that the other finance ministers and central bank presidents attending the meeting at Hilton Hotel discussed solutions to strengthen G20 by turning it into a group led by chiefs of states from these nations. The members agreed that G20 must schedule more regular meetings and not only preceding IMF and World Bank meetings, as well as the disposition to carry out extraordinary assemblies.

The emerging nations also decided to create a virtual situation room to follow the economic routine in time to take part in the decisions. The room will be coordinated by a special G20’s group aiming at these objectives. In terms of financial regulation, the emerging countries will suggest in the Washington Summit more inspection of hedge fund and derivative market institutions.

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Source: Ministério da Fazenda, Brazil

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