SAO PAULO -- Brazil's central bank chief predicts that a looming trade war between the U.S. and China would be "not good for any country," even if Chinese barriers to imports of American foodstuffs offer an opening for Brazilian products.
The world should move toward free trade and away from tariffs and protectionism, Central Bank of Brazil President Ilan Goldfajn told Nikkei an interview.
There is a need "to make sure that these conflicts do not escalate, because global growth depends on trade" without tariffs and protectionism, Goldfajn said. "It's not good for any country, not only for China and Brazil, but for any country, to have this type of conflict." He rejected the view that U.S. difficulties in exporting soybeans and corn to China would benefit Brazil, which competes to supply similar agricultural products to the world's most populous country.
On the global economy, the central banker said that "we are seeing a recovery of global growth everywhere" -- in Europe, in the U.S., Japan, China and other emerging markets. But this comes at a time of "normalization of interest rates," he said, warning that the expected higher interest rates in the future will be a challenge for emerging markets.
So emerging markets "need to do the homework," Goldfajn said, pointing to such structural reforms as privatization, tax, labor and education reforms. He said these agenda items should be pursued in the current benign environment. In Brazil, pension reform must happen "now, not later," he said.
On monetary policy, Goldfajn said that the U.S. Federal Reserve's raising of interest rates has weakened the Brazilian currency, the real, against the U.S. dollar, but said this would not necessarily be a reason to change the central bank's strategy.
"Monetary policy in Brazil is based on inflation targets," he said, noting that today inflation is below the target. Its basic scenario forecasts inflation a bit lower than its target this year, but next year and the year after that it should be on target, he said. Inflation has fallen from 11% two years ago to "below 2% -- that's good news," Goldfajn said.