Brazil Hikes IOF to Stem BRL Rally

Brazil Hikes IOF to Stem BRL Rally

Brazil Economy & Policy Corporate & Sovereign Strategy

In its attempt to contain BRL appreciation, Brazil's finance ministry increased the IOF financial transaction tax on foreign investor inflows into domestic fixed income securities to 4% from 2%. Market consensus points to only a short-term effect on the BRL. Luis Cezario, an economist with Goldman Sachs, believes the BRL could weaken slightly to BRL1.70-BRL1.80 per USD within the next 1-2 months from a current range of BRL1.65-BRL1.75. RBC agrees, saying that the tax hike will induce some short-

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