Brazil raises tax over foreign investments in fixed income

11:03, October 05, 2010      

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Brazilian Finance Minister Guido Mantega announced Monday a rise in the Tax over Financial Operations (IOF) for foreign investments in fixed income.

The measure aims at preventing further devaluation of the U.S. dollar against the Brazilian Real, which would damage the Brazilian exports, he said.

The tax will jump from 2 to 4 percent starting Tuesday.

"We are concerned about not allowing the Real to appreciate too much, not to damage the Brazilian exporters or the local market, which would have to deal with the competition of low-priced imports," he said.

The Brazilian Real-U.S. dollar exchange rate fell to 1.68 reais a dollar last Friday, the lowest rate registered since before the beginning of the international financial crisis. On Monday, the rate closed at 1.692 reais a dollar.

Mantega also stressed that the foreign investors are increasingly interested in Brazil, because of the country's high interest rates (10.75 percent a year). According to him, the higher international financial crisis will help counterbalance the effect of the higher interest rate.

The minister said that lately, the exchange rates have been a concern not only to Brazil, but to several other countries, which have been taking measure to defend their interests.

Mantega stressed that he plans to take his concerns about the exchange rates to the next International Monetary Fund (IMF) meeting, which will take place later in the week in Washington. He hopes that the countries will manage to take coordinated measures to deal with the issue.

Source: Xinhua


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