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Mexico says G20 to look at smoothing capital flows

MONTEVIDEO (Reuters) - Mexico will include possible steps to blunt the impact of sharp capital flows on the Group of 20's policy agenda after discussions with Latin American neighbors, Finance Minister Jose Antonio Meade said on Sunday.

Mexico, which holds the G20's rotating presidency this year, hosted a seminar about G20 priorities on the sidelines of meetings of Inter-American Development Bank. The bloc's only Latin American members are Brazil, Mexico and Argentina.

Meade said via his Twitter account that suggestions from the region would help to enrich the work of the G20, including a push to ease the impact of capital inflows and outflows and tools to administer flows better.

One suggestion Mexico would take on board was to "develop a better capacity to absorb financial flows in domestic financial systems," he said.

Many delegates at the IADB meeting have expressed concern about a recent move toward protectionism, particularly by Brazil, which last week pushed Mexico to curb auto exports over the next three years to boost its industrial sector, hit by an appreciating currency.

Brazil blames loose monetary policy in developed economies for the foreign cash flows that have pushed up the real and unleashed a flood of cheap imports, hurting the competitiveness of Brazilian industries.

Officials present at the Montevideo meeting said Uruguay, Paraguay and other countries had pushed for Mexico to make sure the G20 addressed currencies and trade barriers.

"Mexico was asked to raise issues of protectionism, exchange rates and capital flows," Paraguay Economy Minister Dionisio Borda said.

Meade told Reuters the G20 remained committed to combating protectionism and there was no intention to change this.

"In every G20 meeting what we have done is reconfirm the promise to combat protectionism, recognizing that this is a measure which does not contribute to global growth," he said.

In the G20 leaders' November communiqué, the group said multilateral trade was important as a way to avoid protectionism and called for more exchange rate flexibility.

Protectionism and capital flows were not specifically mentioned in the communiqué following the G20 finance ministers' meeting in Mexico City in March, but Mexico has said one of its G20 priorities is economic stabilization.

(Reporting by Krista Hughes and Guido Nejamkis; Editing by Maureen Bavdek)

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