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Geithner to visit Brazil as U.S. ties improve

BRASILIA (Reuters) – U.S. Treasury Secretary Timothy Geithner will try to advance a rapidly improving relationship between Washington and Brasilia and find common ground on issues such as China's undervalued currency when he makes his first official visit to Brazil on Monday.

After strains in recent years over trade disputes and Brazil's cozy relationship with Iran, new President Dilma Rousseff has openly sought closer ties with the United States since she took office on January 1.

Ahead of the February 18-19 meeting of the G20 group of nations in France, both countries are seeking ways to cooperate to convince China to let its currency appreciate more quickly.

The undervalued yuan -- part of what Brazil has called a global currency war -- has posed a major problem for Brazil's otherwise prosperous economy by fast eroding its trade balance and transferring jobs abroad.

Geithner's visit is also designed to lay the groundwork for a trip by U.S. President Barack Obama in March, which officials on both sides say will signal a better era of cooperation between the Western Hemisphere's two biggest economies.

"Brazil's relationship with Washington will be driven less by ideology than in recent years," a senior aide to Rousseff told Reuters.

Rousseff, a pragmatic leftist, believes that closing ranks with Washington is one of the only avenues available to convince China to correct trade imbalances, advisers say.

"The United States is thrilled with the language the Brazilian government has been using in regards to global economic issues, in particular, regarding China," said Mauricio Cardenas, director of the Latin America studies program at the Brookings Institution, a Washington think tank.

Lael Brainard, the U.S. Treasury undersecretary for international affairs who is accompanying Geithner on the trip, told Reuters that China's yuan and trade policies will be among many common economic interests on the agenda.

"I think we'll be focusing on broad mutual interests -- on where we see the G20 agenda going, on the broader rebalancing of the global economy and currency issues," she said.

Rousseff also wants to work with Washington against France's proposal to tighten international commodity market regulations, a move it argues benefits only wealthy food importers and could stifle output by major food producers.

Brainard said Brazil and the United States share common ground on the G20 commodities agenda and want to make markets more transparent -- a key goal of U.S. financial reform legislation now being implemented -- while working separately to improve food security for poorer nations.

"The approach that we'll want to take there is to improve transparency in the commodity markets, putting in place all of the improvements of the Dodd-Frank Act," she said. "But it's with a view to making markets function more effectively as opposed to supplanting markets."

Rousseff is also reevaluating a large jet fighter deal which France's Dassault was widely thought to have won, thus reconsidering bids by U.S.-based Boeing and Sweden's Saab.

Washington will seek ways to make the G20 a more effective forum to discuss global issues affecting both emerging-market and developed economies, U.S. officials said.

Geithner, who will also meet with Finance Minister Guido Mantega and central bank chief Alexandre Tombini, will also aim to discuss shared bilateral goals such as how best to rein in government spending and rebalance global growth.

Brazil has complained that U.S. easy-credit policies were driving up its currency, the real, and complicating conditions for policymakers.

(Additional reporting by David Lawder and Glenn Sommerville in Washington; Editing by Eric Walsh)