Brasília – The Brazilian government may announce new measures to curb excessive appreciation of the national currency (real) against the dollar. For the time being, however, the minister of Finance, Guido Mantega, believes it is important to keep track of the effects of measures already adopted, such as the raised Tax on Financial Operations (IOF, in the Portuguese acronym) on fixed income investment by foreigners, and greater space for the National Treasury to purchase dollars in order to pay instalments of the foreign debt.
"We must contemplate. We are not going to rush into action; instead, we will wait and see if things calm down spontaneously. If not, then we will take some more measures. We are going to watch," said the minister of Finance, who did not specify what measures would be taken. The market speculates on a new IOF increase. The measure’s intention is putting a brake to the appreciation of the real against the dollar, which has been detracting from the profitability of Brazilian exports.
Mantega said once again that the over-appreciation of the real in the last few days was caused by the strong inflow of dollars into the country, in September, as a result of Petrobras’ fundraising action. "We had an inflow of US$ 16 billion in September. It is an extraordinary sum," he said. After the operation ends, however, dollars have continued to enter the country.
The reason for that is, the higher IOF notwithstanding, the country’s interest rates are still attractive when compared with the tax rates in other countries, such as the United States and European nations. Thus, many international investors loan money in other countries and then invest it in Brazil at profitable interest rates.
*With information from the ANBA Newsroom. Translated by Gabriel Pomerancblum