BRIC by BRIC: Chipping Away at China’s Currency Policy

by Todd Shriber

Love him or hate him, Treasury Secretary Timothy Geithner is many things. But getting China to alter its stance on the yuan/dollar relationship and let the Chinese currency to float freely is not (yet) one of Geithner’s accomplishments. At least help is on the way.

Brazil’s newly inaugurated president, Dilma Rousseff, intends to make the Chinese currency and its relationship with the Brazilian real, a 2010 standout among emerging markets currencies, among her top priorities when she heads to China for her first visit in April, Bloomberg News reported.

A Business Insider headline reads, “Brazil Is About To Take Washington’s Side In The Currency War.” While that may be a stretch simply because Brazil is going to protect its own interests in this BRIC-on-BRIC currency tussle, Geithner and friends need all the help they can muster when it comes to getting Beijing to allow the yuan to appreciate.

Let’s be honest: Brazil carries a tad more mojo than the U.S. when it comes to trade with China. China surpassed the U.S. as Brazil’s largest trading partner last year, The Telegraph reported. And Brazil can dangle a very precious carrot in front of the Chinese to get its desired result: natural resources. One need not be an expert in natural resources to know that plenty of Vale’s (VALE) iron ore and a decent amount of Petrobras’ (PBR) oil heads to China.

We’re not saying it’s going to happen, but it’s a card Rousseff could play should she so desire. Brazil is already fighting fire with fire, raising its tariffs on Chinese toy imports last month, according to China Daily. And as Trader Daily reported, Brazil knows a little something about trade tariffs.

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