Brazil was the first country to say openly that the world is facing a currency war. And its government is being increasingly active in opening battles in the defence of its rising real. The IOF tax on portfolio inflows into fixed-income instruments now stands at 6%, up from 2% one month ago. The government has also levied a similar tax on margin deposits on derivative contracts from non-residents. Perhaps more important, it then moved to close off easy loopholes to avoid the IOF – what it described as “regulatory arbitrage”.
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