Stephen Harper says a slow global economic recovery is still possible as long as Group of Seven countries prudently manage their fiscal houses and avoid being dragged into crises.
The Prime Minister, in Brazil to deepen ties with the world's seventh-largest economy, tried to reassure Canadians after stock markets on Bay Street and Wall Street plunged in the aftermath of the downgrade of the heavily indebted U.S. government's credit rating.
"To date, this doesn't change our overall assessment. Notwithstanding the fragility of the economy and the headwinds that are there, we believe that a gradual recovery can continue," Mr. Harper said. "We remain optimistic that with the right policy mix, with all of us throughout the G7 working together, acting cautiously and prudently – and together and in ways that don't create crises – that we can continue to see a slow rebound of the economy."
His comments followed an address by Barack Obama in which the U.S. President said political dysfunction was to blame for the move. He said Standard & Poor's downgraded the U.S. rating "not so much because they doubt our ability to pay our debt" but because it "doubted our political system's ability to act."
Mr. Harper said he wasn't ignoring the panic on the stock exchanges – where the scale of losses in recent weeks prompted fears of a selloff like the kind that occurred during the 2008 financial crisis. The Prime Minister, however, said the events of the past few weeks do not change his forecast.
"I've said all along there are going to be bumps along the way. Obviously in the last few days there has been significant turmoil in the markets. I am not discounting that. It is something we watch very carefully," he said.
Brazilian President Dilma Rousseff took time in her speech at a signing ceremony Monday with Mr. Harper to question Standard & Poor's for downgrading the U.S. credit rating.
"We do not agree with the rush to valuation, I would even say incorrect evaluation by Standard and Poor's, which reduced the credit rating of the U.S.," Ms. Rousseff said.
Mr. Harper refused to echo Ms. Rousseff's words. He said it wasn't his place to comment on the rating agency's decision, noting however that Standard & Poor's gave Canada a glowing assessment recently. "I think it was the most positive in the developed world," he said.
Asked to comment on U.S. fiscal problems, the Prime Minister declined. Choosing a more diplomatic tone, he noted that all Group of 20 countries vowed during their 2010 summit in Toronto to abide by guidelines for trimming spending and debt.
"We all know there are serious debt challenge in other countries," he said. "At the G20 in Toronto, countries agreed to some deficit, debt-reduction targets. We encourage them to respect those targets."
Mr. Harper said Canada is taking measures to spur long-term economic growth, including spending on training and infrastructure – but also signing free-trade agreements to diversify trade beyond the United States. Canada is reliant on the ailing U.S. economy to buy the vast bulk of its exports.
He said Canada needs to take advantage of its resource abundance to sell more to emerging economies outside the developed world.
The Harper government would like a free-trade deal with Brazil, but such an agreement is likely years away because the Latin American country is obliged to negotiate any deal along with the rest of its Mercosur economic bloc. That includes Argentina, Paraguay and Uruguay.
Among co-operation agreements signed with Brazil on Monday was a deal to further open up commercial air traffic between Canada and the South American nation. The Tourism Industry Association of Canada predicted the new air-transport deal would pave the way for more visits to Canada by Brazilian tourists and business people.
"This expanded open-skies agreement will provide us with greater opportunities to deliver more Brazilian leisure and business travellers to more Canadian destinations," tourism industry association president David Goldstein said. "Brazil is … a priority market, with a burgeoning middle class that is enthusiastically engaging in international travel."