July 9 (Bloomberg) -- Leaders of the world’s biggest developed and emerging nations avoided a debate over the dollar’s role in the global economy as they agreed not to devalue their currencies to promote their exports.
With officials from Brazil, India, China and Russia pushing consideration of alternative reserve currencies, their joint statement’s language on foreign exchange echoed an agreement at an April summit of the Group of 20.
The leaders agreed to “refrain from competitive devaluations of our currencies,” according to the statement released after their meeting today at the G-8 summit in L’Aquila, Italy. They also agreed to “promote a stable and well-functioning international monetary system.”
The global financial crisis and the surge in U.S. borrowing have prompted Russian President Dmitry Medvedev to advocate diversification away from the dollar. Russia and its counterparts have yet to come up with a viable alternative.
British Prime Minister Gordon Brown told reporters today “there was not a serious discussion” about the topic.
“To talk about the long-term future of the world economy and the arrangements that are necessary is something that world has got to do, but I don’t want to give the impression that there’s a major change about to happen around the corner which will mean that present arrangements are disturbed,” Brown said.
Brazilian and Russian officials said they intended to raise the issue at the next G-20 meeting in Pittsburgh in September. The dollar “may well be” brought up there, Brazilian Foreign Minister Celso Amorim said. Arkady Dvorkovich, President Dmitry Medvedev’s economic aide, said currencies are a G-20 matter.
Local Currencies
Emerging nations are seeking to lower the dollar’s role in their economies. Brazil’s President Luiz Inacio Lula da Silva wants the biggest developing nations to use their own currencies in settling trade accounts, India’s Foreign Secretary Shivshankar Menon told reporters yesterday.
The so-called Group of Five -- Brazil, China, India, Mexico and South Africa -- met yesterday and discussed “looking at the use of alternate currencies, not so much as reserve currencies,” Menon said. “But Brazilian President Lula suggested that we should consider using our own currencies to settle our own trading accounts with each other.” Menon said “everyone recognizes” that the idea of a new reserve currency “is a long-term goal.”
In May, Lula and his Chinese counterpart Hu Jintao discussed ways to use their currencies in trade after China replaced the U.S. as Brazil’s biggest trading partner.
“We need to improve the international currency regime to have a better foreign exchange issuing and reserve currency system so that we can have relative stability in the reserve currencies’ rates and so that we can have a diversified and rational international reserve currency regime,” Foreign Ministry spokesman Ma Zhaoxu said today in L’Aquila.
The G-8 comprises the U.S., U.K., France, Germany, Italy, Japan, Russia and Canada.
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