Brazil Announces
Measures to Halt
Revaluation of Real
Brazil's Ministry of
Finance announced a
package of measures
Wednesday in a bid to
halt the devaluation of
the U.S. dollar against
the local currency real
and prevent a slump in
the country's trade
balance surplus in the
next few years.
The measures include
higher taxes on
speculative investments
from abroad and
advantages for Brazilian
exporters.
The highlight of the
measures was the
suspension of the
compulsory foreign
exchange cover, under
which exporters had to
bring back a part of the
revenues obtained from
foreign trade. The
ministry also determined
that a 1.5 percent tax
will be charged on
foreign investments in
federal bonds and in
fixed-income asset, in
the form of the
so-called Tax on
Financial Operations (IOF).
IOF will no longer be
charged on exchange
operations of exporters.
Further, Finance Miniser
Guido Mantega said the
country's industrial
policy will be
"redesigned," so as to
prearrange tax
incentives mainly for
exporters, a move that
relies on pre-approval
from President Luiz
Inacio Lula da Silva.
The measures will come
into effect Monday,
March 17. The U.S.
dollar was traded at
1.68 reals Wednesday,
less than half its value
in 2003, when President
Lula took office for the
first time. As a
consequence, Brazil's
trade surplus dropped
from 46 billion U.S.
dollars in 2006 to 40
billion dollars in 2007,
and it is not expected
to exceed 30 billion
dollars this year.
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