Brazil Continuous Introduce Measures to Control the Exchange Rate


Since the influx of large dollar in Brazil, the Brazilian real against the U.S. dollar led to pick up again to September 2008 levels before the financial crisis, the Brazilian government has recently been introduced measures intended to prevent the real exchange rate continued to climb.

This year, with the steady recovery of economic growth in Brazil, into the U.S. capital continued to increase in Brazil, especially in September, after the Brazilian oil company additional equity financing, a large number of dollars into the Brazilian market. According to Central Bank of Brazil on October 6 to figures released this year, a total of 16.716 billion U.S. dollars in September into Brazil, the Brazilian Central Bank since 1982, the statistics for a single month since the maximum amount; a result, the net inflow of the month to reach 137.26 dollars in Brazil billion, far higher than a year ago.

Although the Central Bank of Brazil twice a day into the market to buy dollars to prevent the real appreciation trend, but still has repeatedly in recent rise in real currency. September 15, the real exchange rate of 1.708 against the U.S. dollar to 1, the highest since last November. October 5, the real exchange rate against the U.S. dollar to 1.675 more than 1, is the financial crisis, the highest level in two years.

Real rapid appreciation of the Brazilian industry is being restored as good as a blow. Brazilian Finance Minister the end of September, said in Sao Paulo, Brazil has taken steps, through the use of foreign exchange reserves and sovereign wealth funds to absorb the excess dollars on the market to maintain exchange rate stability. He stressed: “Brazil, 2,700 billion foreign exchange reserves, the ability to prevent excessive real appreciation.”

October 4, Mantega announced that Brazil will be the 5th, to increase foreign investors for fixed income investments in Brazil’s financial operations tax rate from 2% to 4%. He stressed: “The real exchange rate of dollar decline will affect our exports. To this end, we decided to raise taxes.”

Real appreciation is expected in November last year, when rising, the financial operations through the collection of taxes in Brazil, the Brazilian capital markets inhibit the inflow of short-term foreign capital arbitrage, and achieved good results, the real against the U.S. dollar down gradually in early May of this year’s level of 188.1 to 1 . Today, the Brazilian government, apparently hoping to improve on the taxation of foreign capital arbitrage against the short-term “hot money” interest in the Brazilian market to stabilize the real currency.

Announced increases in financial operations tax rate of the day, the Brazilian government once again punching, authorizes the Treasury to purchase in advance the total stood at 107 billion U.S. dollar foreign exchange to repay the bonds due 2014, previously the Ministry of Finance is authorized only for the two bonds maturing during the year for repayment of funds. Financial community here believe that the move will increase the Treasury’s ability to respond to the exchange rate.

However, the real against the U.S. dollar has not crashed down, still a high level of 1.7 to 1 run. Mantega the media stressed that effective policy can not in a day, but the Brazilian government have the ability to control the exchange rate.