Brazil will Impose Import Levies to Face “Cheap” US Dollar, Unless Accord is Reached

(MercoPress)

Brazil’s government may take additional steps to limit gains in the local currency (Real) should advanced economies favor policies that keep their currencies weak, Finance Minister Guido Mantega said. “We will take further measures if we don’t reach an agreement” Guido Mantega said in New York. Last year, Brazil implemented a tax on foreign purchases of stock and fixed-income investment in a bid to stem the currency’s advance.

Mantega said he was “worried” after last weekend’s International Monetary Fund (IMF) meetings in Washington, where officials from the US and other developed nations said they intend to keep their benchmark interest rates low. Reduced lending rates can weaken currencies by prompting investors to shift their money to countries where rates are higher.

“I told my colleagues we won’t just watch the deterioration of our situation,” Guido Mantega said. A stronger Real would put Brazilian exporters at a disadvantage by making their goods more expensive in dollar terms. After gaining over 30% last year, the best performance against the US dollar among the 16 most traded currencies tracked by Bloomberg, the Real has lost 0.1 percent in 2010. Read more here.