Brazil Taxes Inbound Speculative Funds

In an unprecedented move for the South American country, Brazil is planning to impose a tax to inbound investment to slow down the climb of the real. It is going to be interesting to see if this move is a wise choice by Brazilian authorities and if it can reduce speculation without damaging Foreign Direct Investment.

The tax on capital inflows, which takes effect today, will take the form of a 2 per cent levy on foreign investment in the stock market and in fixed-income securities, such as government bonds.

Guido Mantega, Brazil’s Finance Minister, said that the tax would not affect foreign direct investment into Brazil. “We will continue to encourage foreign investment. Our concern is with excessive speculative investments, short-term capital that would cause a bubble,” he said.

Times Online

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza