Brazil's president on Saturday demanded that major reforms of the international financial system include strong input from large emerging nations and said the collapse of modern banking structures is victimizing the world's poor.
Those who have the least stand to lose the most from a credit crunch that has slammed businesses from Brazil to China, President Luiz Inacio Lula da Silva told finance ministers and central bank presidents from the world's 20 major economies, who gathered in Sao Paulo ahead of a Nov. 15 summit in Washington.
Officials from the Group of 20 nations must “formulate proposals for a substantial change of the world's financial architecture,” Silva said.
“This system collapsed like a house of cards that dragged down with it the dogmatic faith in the principles of nonintervention by the state in the economy.”
In closed-door talks, leaders also discussed ways for nations to boost government spending to counter a global slowdown that could lead trade to contract next year for the first time since 1982, said World Bank President Robert Zoellick.
Chinese officials in particular discussed a strong fiscal expansion, Zoellick said.
Millions of people in developing nations are suffering from a worldwide credit crunch that started in the U.S. and Europe and has spread to rapidly growing emerging market nations, Silva said.
After lending by rattled U.S. and European banks slowed, foreign investors sold off emerging market assets, forcing extreme measures by governments including Brazil's to prop up sagging currencies and provide credit lines to companies.
The U.S. supports giving Brazil and other developing nations a significant role, said David McCormick, the U.S. Treasury Department's undersecretary for international affairs.
Silva “presented a constructive overview of the challenges we face and the need for developed and developing nations to work together in addressing those challenges,” McCormick said.