International News : By Luciana Otoni BRASILIA, May 12 (Reuters) - The government on Wednesday zeroed to the Tax on Financial Transactions (IOF) levied on net positions sold in dollar futures market, in a further attempt to halt the U.S. currency against the real. "We are reducing this rate of 1 percent to make it easier for those who wish to make applications for short position on the dollar. Consequently, there will be a greater supply of dollars in the futures market," said Finance Minister Guido Mantega, on Wednesday Monday. Last week, the government had reduced from 6 to zero the rate of IOF on the inflow of foreign funds for investment in fixed income. According to the minister, given the signs that the Federal Reserve, the U.S. central bank may reduce monetary stimulus, actions are needed to increase the supply of dollars in the Brazilian economy. "It makes no sense to keep hindrance to short positions in dollars in the futures market are penalized," he said. As we enter into force on Thursday. The dollar has been undergoing a process of strengthening the international markets due to the expectation that the Fed will inject 85 billion dollars every month on the market. In Brazil, the movement is accompanied by fears that the appreciation of the U.S. currency further hamper the fight against inflation, since it makes imported goods more expensive. On Wednesday, the dollar closed the first time in four years at a level of 2.15 reais. To the chief economist at Global invx, Eduardo Velho, the effectiveness of the measure to curb the depreciation of the real should be limited. "It is a positive step, more or less expected by the market and maintains standardization in rates below 2.15 real, but it is only palliative," he said. The withdrawal of the IOF for fixed income last week was not enough to contain rising dollar, prompting the central bank to intervene in the market by offering traditional swaps - which amount to a future sales dollar. Old said the dollar is heading towards a plateau structurally highest in the world, which means that the currency is still down in Brazil. "(The reduction of the IOF) does not reverse the high pressures that will still happen." The government began to impose restrictions on the entry of foreign capital in 2008, because Brazil was attracting a flood of resources, leading to an unwanted appreciation of the real. Of all the measures taken, the only remaining collection of IOF 6 percent in funding of overseas companies with maturities of up to one year. The economist invx Global believes that this lock will also be removed soon. TAX MEASURES Mantega returned to make the defense of fiscal policy that the government will fulfill the primary surplus target of at least 2.3 percent of Gross Domestic Product (GDP) this year and said that, if necessary, may extend cutting public spending set for 2013. "The margin (to cut spending) shall be that required to ensure the 2.3 percent primary is met. We will have to revise it (contingency) in the light of the revenue and spending behavior." In May, the Ministries of Finance and Planning announced contingency of 28 billion dollars in the budget this year and the possibility of reduction of 45 billion of real primary surplus target of 155.9 billion reais. The minister also said that inflation is falling and that the high food prices cooled. "Looking ahead, the trend is that inflation becomes more well-behaved." (Additional reporting by Bruno Federowski in São Paulo, and Nestor Rabello in Brasilia).
Posted on: Sat, 14 Sep 2013 11:51:26 +0000
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