Brasília – The Central Bank of Brazil (BC) disclosed on Monday (2) that Brazilian reserves in foreign currency ended last year at a record US$ 352.012 billion, or US$ 63.437 billion more than the US$ 288.585 billion of late 2010.
There was growth of 21.98% in 2011, partly due to the purchases made by the BC on the spot market to contain devaluation of the North American currency. This took place mainly in the first half, when the inflow of dollars into the market caused the BC to make almost daily interventions.
The strong inflow of foreign currency took place despite the measures to complicate financial speculation by foreign investors, like the increase of the Tax on Financial Operations (IOF) levied on short and medium term investment and on loans made abroad by Brazilians.
The dollar exchange rate reached a minimum price of 1.54 Brazilian real in 2011, on the 26th of June, causing the government to issue Provisory Measure 539 that same day, authorising the National Monetary Council (CMN) to establish specific conditions. Among them, a fee of up to 25% over the value of operation with papers involving derivatives or other financial assets.
Apart from the greater cost of foreign transactions, speculative movement in dollars started losing strength after the BC inverted the monetary policy process, in late August. The benchmark interest rate (Selic), which had been on the rise for the first seven months of the year, then dropped from 12.5% to 12% a year.
The reduction of the Selic, repeated in two later meetings of the Monetary Policy Committee (Copom), caused the interest rate to end the year at 11%. The change in the monetary policy and the measures for making foreign operations more expensive resulted in higher exchange rates and the BC abandoned daily interventions in the exchange market in October.
*Translated by Mark Ament
