Brasília – New elevation of the Tax on Financial Operations (IOF) for foreign funds turned to the fixed income sector in Brazil pleased the Brazilian Association of Importers of Industrial Machinery and Equipment (Abimei). The government, which had already increased the tax from 2% to 4% two weeks ago, has now adopted 6%, as a way to reduce pressure on exchange rates.
The government has also increased the tax levied on the marginal guarantee on foreign investment in the futures market from 0.38% to 6%. According to Daniel Dias de Carvalho, the financial director at the association, those who believe that the sector can increase imports with the depreciation of the dollar are mistaken. "It’s not truly like that. Things don’t work that way. If the dollar is too depreciated, we cannot sell here," he explained.
He recalls that importers in the sector depend on a solid economy, with demands causing the need for new machinery and equipment. And, on the contrary, with the weaker dollar, there is a great excess of foreign products on the market, not always good quality.
"When the dollar is too depreciated in Brazil, we lose competitiveness [against foreign products on the market]. We also cannot export [due to the appreciated real against the dollar, Brazilian products become more expensive abroad]. It affects a great part of our economy. We do not believe that the dollar must be as depreciated as possible," said the Abimei representative.
To Daniel de Carvalho, the dollar must be at “ideal conditions” for the economy to operate in a healthy manner, with the introduction of new products on the domestic market. Although I believe it is hard to ponder the ideal dollar value, the Abimei representative evaluates that each dollar should cost between 1.80 and 2.00 Brazilian reals. "I believe that at these exchange rates the economy of Brazil would be competitive and there would be no problem with inflation due to appreciation of the products," he said.
*Translated by Mark Ament
