Brazil May Tax Foreign Inflows to Curb Real Rally, Estado Says - Bloomberg.com

By Telma Marotto

Oct. 16 (Bloomberg) -- The Brazilian government may reintroduce a tax on foreign capital inflows to curb a currency rally against the dollar, O Estado de S. Paulo reported without saying where it got the information.

The so-called IOF tax may be levied on fixed income investments and also on stock purchases, Estado said. The measure was discussed in a meeting Oct. 13 with President Luiz Inacio Lula da Silva, Estado said.

Foreign inflows in Brazil have intensified in the past few weeks and are becoming a problem for the competitiveness of Brazilian exporters, Estado said. The country may receive $20 billion to $30 billion in foreign investment throughout the end of the year, Estado said.

Finance Ministry spokeswoman Patricia Mesquita in Brasilia declined to comment when called by Bloomberg, saying the ministry doesn’t have an official position on the proposals.

The Brazilian real is up 36 percent this year against the dollar, the best performance among 16 major currencies tracked by Bloomberg.

To contact the reporters on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net
Last Updated: October 16, 2009 07:52 EDT"