Brazil's Lula calls for shake-up of global finance (Updated)

SAO PAULO: Brazil's president called on Saturday for an overhaul of the global finance system which "collapsed like a house of cards" in the credit crisis and said emerging powers must have more say in key decisions. Luiz Inacio Lula Lula, addressing finance officials and central bank chiefs from around the world, slammed the "dogmatic faith in non-intervention in markets" that has been espoused by the United States and other countries "We need new, more inclusive governance and Brazil is ready to face up to its responsibilities," the burly former union leader said. "It is time for a pact between governments to build a new financial architecture for the world." Finance ministers and central bank governors met in Brazil's economic hub of Sao Paulo to grapple with ways to tackle the global financial crisis on Saturday.
Canadian Finance Minister Jim Flaherty expected central bankers to continue discussions about joint action to lower interest rates further and counter the blow to growth from the credit crisis. "I expect that these discussions will lead to some degree of coordinated action," Jim Flaherty told reporters as the discussions got under way on Saturday. On Friday, the "BRIC" nations of Brazil, Russia, India and China for the first time forged a joint position that called for reform of institutions like the International Monetary Fund to reflect the growing importance of developing economies. The G2O group, which includes emerging and advanced economies, should take over from the rich-country G7 grouping as the main forum for discussing global finance, Brazil said. The South American economic powerhouse holds the presidency of the G20 this year. "We refuse to take part in the G7 merely to drink coffee and we have to have a more important role in discussions," Brazilian Finance Minister Guido Mantega said on Friday. Lula has long criticized the dominance of the United States and other developed economies in the way decisions on global finance are taken. Among officials attending the meetings in Sao Paulo were central bank chiefs such as Ben Bernanke of the U.S. Federal Reserve and Jean-Claude Trichet of the European Central Bank. Canada's Flaherty played down the need for a major shake-up of the way global finance is managed. "Now is the time to be putting out the fire, not to be planning for grand new schemes," he said. "We're in the midst of a crisis and certain things need to be done now."  Any progress at the G20 gathering and a meeting of the Bank of International Settlements also in Sao Paulo could be taken to a G20 heads of state summit in Washington on Nov. 14-15. But the chance of major reform proposals appear slim, not least because the outgoing administration of U.S. President George W. Bush has played down the need for big reforms. U.S. Treasury Secretary Henry Paulson and many European finance ministers did not attend the meetings in Sao Paulo.  The finance minister of France, which holds the European Union's presidency, told Reuters as she arrived in Brazil that this weekend's meetings would be pave the way for the Washington summit.  "I don't think it will be conclusive because it can only be conclusive at the level of heads of state and government. But if we can compare notes and share views sufficiently so that positive conclusions can be reached at the Nov. 15 meeting, then we will have done a good job," Lagarde said.

SAO PAULO, (AFP) - World finance chiefs aimed to forge a consensus Sunday on boosting the role of emerging nations and crafting a new system to help a struggling global economy.  The Group of 20 gathering of finance ministers and central bank governors wrap up a meeting in Sao Paulo that seeks to lay the groundwork for next week's Washington summit on the deepening economic crisis.  World Bank President Robert Zoellick, who is part of the discussions, said a new financial architecture will take time but that all countries see the need for a coordinated response to the economic troubles. "All of us know it's a meeting at a time of historic challenge," Zoellick said. "The food and fuel crises of the recent years have now been supplemented by the blow of a financial crisis. Virtually no country has escaped ... All countries are moving into a danger zone." Zoellick, who last month said that the Group of Seven was "not working" in fixing the economy but that a G20 system was "too unwieldy" indicated Saturday that a new system will take time to evolve but was inevitable."These global challenges require global solutions," he said. "We need to modernize the multilateral system to bring in the important developing country voices such as Brazil ...I think over the next two years we are going to see some real changes to the global system."  But asked about how the Sao Paulo meeting was moving toward establishing such a new system, Zoellick said, "I think it's too early to say." The calls for a broader multilateral response came despite caution by Washington, where the lame-duck administration of President George W. Bush has been noncommittal ahead of the transition to president-elect Barack Obama, who assumes office in January. US Treasury Secretary Henry Paulson was not at the Sao Paulo meeting of finance ministers and central bankers, sending instead Treasury undersecretary David McCormick, who said only that initial talks were "very productive."  McCormick did not elaborate, beyond noting that Brazilian President Luiz Inacio Lula da Silva, who opened the meeting, "presented a constructive overview of the challenges we face and the need for developed and developing nations to work together in addressing those challenges."...Lula said nations struggling with the crisis must "avoid temptations to take unilateral measures," and stressed that "new universal mechanisms are needed" that have to be worked out in concert. "The crisis gives an opportunity for real changes," he said, adding: "We cannot, we must not and don't have the right to fail." European leaders have said they hope the Sao Paulo meeting will lay the groundwork for the start of key reforms to be put in motion starting with a November 15 summit in Washington of G20 leaders.  The emerging nations want to see the G20 -- which includes the G7 and the BRIC countries plus other significant developing economies -- reinforced and elevated to a heads-of-state and heads-of-government level, above the finance ministerial status it currently has. The head of the International Monetary Fund, Dominique Strauss-Kahn, warned in an interview with the Financial Times that "expectations should not be oversold" of a successor to the 1944 Bretton Woods system being agreed.  "Things are not going to change overnight. Bretton Woods took two years to prepare ... The words sound nice but we are not going to create a new international treaty," he said. The EU has nonetheless put together its "wish list" for the summit, including tougher regulations and a stronger role for the World Bank and International Monetary Fund.The G20 includes the seven major industrialized nations -- Britain, Canada, France, Italy, Japan, Germany and the United States -- plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.It also includes the 27-member European Union