Brazil Imposes Foregin Fund Flows Tax

Here’s another unintended consequence of loose monetary policy by the US:

The Bovespa is up 79% so far this year, and its currency, the real, has climbed nearly 40% against the U.S. dollar this year, moves that haven’t escaped the eye of government officials. Late Monday, the finance ministry said it will impose a 2% tax on foreign fund inflows into equities and fixed-income in a bid to ease the currency’s surge. The tax will go into effect on Tuesday.
The size and the breadth of the tax “is definitely larger than expected and is likely to have a negative market impact on the [real] and on the local yield curve,” said Nick Chamie, head of emerging markets research at RBC Capital Markets, in a note late Monday, adding that it had moved to an underweight position on the currency in its model portfolio earlier in the day.

Source : CBS Marketwatch

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Comment by kusum

2009-10-20 03:02:23

i think imposing tax will definitely going to effect the foreign trade,it can restrict the power of earning foreign funds,tax should be only for the revenue purpose,so if tax is imposed it should b limited,because imposing too much tax can make trader uncomfortable and disturb in trading,although this imposed tax will increase government revenue in short run but in the long run it can b dangerous to government,as trader may oppose,so i think this imposed tax either reduced or should be vanished………….that’s what i think over this news,thanks and have a good time,bye

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