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UPDATE 1-Brazil may tax foreign capital in 'currency war'
September 21, 2012 / 10:30 AM / 5 years ago

UPDATE 1-Brazil may tax foreign capital in 'currency war'

By Ana Nicolaci da Costa and Sujata Rao

LONDON, Sept 21 (Reuters) - Brazil threatened on Friday to impose taxes on speculative foreign capital, firing a warning shot in a “currency war” its finance minister blamed on money-printing by Western central banks.

Guido Mantega said Brazil would not allow its real currency to appreciate excessively and was prepared to take all steps “such as those we adopted in the past”.

“If necessary, if the inflows are even stronger, we have (the option) of short-term capital taxes that could (be introduced),” Mantega told reporters on the sidelines of an Economist conference in London.

“We will adopt new measures in terms of taxing of financial operations.”

Brazil shocked investors in October 2009 by imposing taxes on some categories of foreign investment flows to local stocks and fixed-income securities. Back then, it said some of the flows constituted hot money and were harming the economy.

Mantega has been one of the foremost critics of the asset buying programmes of ‘quantitative easing’ that Western central banks have been using to shore up their economies, accusing them of in effect devaluing their currencies to boost competitiveness.

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