Controlling Brazilian FX for Exports

Investment pours into Brazil.Since Rio de Janeiro was awarded the 2016 Olympics Games to compliment the fact that Brazil is to host the 2014 football World Cup, their has been a rapid increase in foreign investors focus on the country. To slow down the flood of investments into the country the government has launched a 2% tax on investments from outside Brazil. With elections rapidly approaching next year the state of the domestic economy which rests heavily on exports must remain competitive to ensure peoples livelihoods. If the BRL gains too much strength against the US$ exports will fall. The Brazilian Central Banks action is likely to become more aggressive the more the Real lifts against the US$. The 2% tax could be increased, baring in mind the domestic interest rate is extremely high – 4-5% above inflation (approximately 6%). Other measures are likely to be implemented until the Central Bank has stabelised the growth of the BRL.

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