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Tax rise will have little impact on Brazilian investment
08/10/2010
Brazil's short-term tax raise on overseas investments in local bonds is likely to have little effect in the medium term, according to a senior credit officer, due to the nation’s current strength as an investment location.
Mauro Leos from Moody's Investors Service for Latin America, said the amount of money currently being ploughed into Brazil was nothing short of "wall" and that is was difficult at the moment for any government actions to affect that in any way.
"They can do something at the margin but at the end of the day Brazil will have a strong currency," he said.
"This will make it hard for exporters, but for the purposes of the sovereign rating it's not significant" he explained, because Brazil has insulated its sovereign debt from foreign exchange fluctuations.
He said the continuing low interest rates in developed economies like the US will keep encouraging investors to shift their money abroad and that all emerging economies were likely to keep seeing their currencies strengthen.
The government boosted the tax on short-term investments from overseas into the local fixed-income market on Tuesday, in a bid to control the strong gains of the Brazilian real against the US dollar. After weakening slightly against the dollar at the open, the Brazilian real reversed course and was trading at BRL1.673, stronger from Monday's close of BRL1.693.
Mauro Leos from Moody's Investors Service for Latin America, said the amount of money currently being ploughed into Brazil was nothing short of "wall" and that is was difficult at the moment for any government actions to affect that in any way.
"They can do something at the margin but at the end of the day Brazil will have a strong currency," he said.
"This will make it hard for exporters, but for the purposes of the sovereign rating it's not significant" he explained, because Brazil has insulated its sovereign debt from foreign exchange fluctuations.
He said the continuing low interest rates in developed economies like the US will keep encouraging investors to shift their money abroad and that all emerging economies were likely to keep seeing their currencies strengthen.
The government boosted the tax on short-term investments from overseas into the local fixed-income market on Tuesday, in a bid to control the strong gains of the Brazilian real against the US dollar. After weakening slightly against the dollar at the open, the Brazilian real reversed course and was trading at BRL1.673, stronger from Monday's close of BRL1.693.
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