The minister, Guido Mantega, said wealthy countries were attempting “to export their way out of difficult economic situations” by printing money and keeping interest rates low. Those policies are driving up the prices of food and oil, causing particular pain for the world’s poorest people, Mr. Mantega told the policy-making committee of the International Monetary Fund.
His strong remarks highlight the challenges the United States and Europe face as they try to change their economic relationship with the developing world. In place of unsustainable borrowing to fuel consumption of imported goods, they would like to sell more goods and services to those countries. The problem is that developing nations, losing business from their best customers, hope to replace sales by increasing domestic consumption — selling to the same customers developed nations are trying to reach.
It is a dispute that plays out largely in terms of exchange, with both sides charging that their rivals are boosting exports by artificially suppressing the value of their currencies.
The two sides spoke past each other over the last week, during the annual meetings of the major forums for international economic coordination — the monetary fund, the World Bank and the Group of 20.
The United States says that higher prices are not a necessary consequence of American policies, but instead have resulted from the efforts of developing countries to hold down the value of their own currencies in the face of the capital inflows from developed countries.
The treasury secretary, Timothy F. Geithner, said Saturday that developing nations should allow the value of their currencies to be determined by open-market trading. The United States believes that the exchange rates set by the market will contribute to a more sustainable allocation of economic activity among nations, and increased international growth.
“Major economies — advanced and emerging — need to allow their exchange rates to adjust in response to market forces,” Mr. Geithner said.
Rising concerns about inflation shadowed the debate. Commodity prices and asset values are already rising sharply in the developing world, and there is concern that those pressures could contribute to inflation in developed countries.
Economic development in China and other emerging markets has long been felt in the United States largely in the form of lower prices. As those countries absorb a larger share of the world’s raw and finished goods, the impact instead may be felt in the form of rising prices.
“Interest rates rising in the emerging world could drive up interest rates in the developing world,” said Tharman Shanmugaratnam, the finance minister of Singapore and the new chairman of the International Monetary and Financial Committee. “We’ve learned from very painful experience during the last few years that nothing is isolated.”
Economic policy makers in the United States have played down the impact of commodity prices on domestic inflation. European policy makers, by contrast, are increasingly concerned.
Didier Reynders, the Belgian finance minister, warned in a statement that “one should not underestimate” the possibility that food and oil price inflation could travel from the developing world to Europe and the United States. He noted that those pressures would pass through the same financial and trade channels that helped to lower global inflation in the past by holding down prices. “Central banks everywhere should be highly vigilant,” Mr. Reynders said.
Article source: http://www.nytimes.com/2011/04/17/world/americas/17imf.html?partner=rss&emc=rss