Brazil

Brazil

September 01, 2012

Brazil said in June that it will limit collection of a 6% financial transactions tax, called the IOF, to loans of up to two years. Brazil increased the tax rate from 0.38% to 6% and extended the tax to loans of up to five years in March in an effort to discourage short-term dollar inflows that were hurting exports by causing the real to appreciate against the dollar. The government reversed course three months later after deciding it was more important to make it easier for Brazilian companies to borrow from foreign banks. The European financial crisis has caused a number of banks to withdraw from the market.

Meanwhile, BNDES, the Brazilian development bank, has suspended loans to purchase wind turbines that do not meet domestic content requirements. Turbines made in Brazil do not qualify for BNDES financing unless at least 40% of the components are made in Brazil.

Keith Martin