MercoPress. South Atlantic News Agency

Brazil ready to take additional measures to limit local currency from strengthening

Mantega confident about a set of “weapons”

Finance Minister Guido Mantega said the government is ready to take additional measures to limit gains in the Real, including stricter limits on risk exposure for investors in the futures market, should the currency continue to strengthen.

“Don’t worry, we have the weapons,” Mantega said in an interview today with GloboNews. “We can limit exposure to risk, limit the leveraging of companies” in the futures market.

President Lula da Silva’s administration, in a bid to stem a rally in the Real, doubled a tax foreigners must pay to buy local fixed-income securities earlier this month. Policy makers also allowed the Treasury to step up dollar purchases for debt payments.

The measures failed to prevent the Real from gaining. The currency has strengthened 1.6% since the higher tax was implemented the best performer over that period among Latin American currencies according to Bloomberg.

The Finance Minister said that Brazilian law “unfortunately” doesn’t allow a capital inflow tax on the derivatives market. Earlier today, Mantega told reporters the government is waiting to see if the Real stabilizes before deciding whether to take additional measures.

He said dollar inflows slowed this month after investors brought 16 billion USD into the country to partake in Petrobras share offering in September.

Mantega also said he sees no sign of asset bubbles in Brazil.