Brazil - More of the Right Moves

Brazil is reducing taxes on foreign investments.  As they have specified that private equity and venture capital is the focus of the cut, it ought to help draw funds into these sectors.  Timing is good as investors ate looking for the EM investments and Brazil continues to try to build out early stage investment as well as non-exchange based investments.  These are the two areas the country needs to draw funds into as they typically help the country and its economy more than just exchange based investment.  I believe the currency will continue to strengthen from here given its growth rate and real yield.  This could also help attract investment to assist in the closing of the current account gap.


The investment climate has also been helped by President Dilma Rousseff showing she might be more market friendly than her predecessor.

RIO DE JANEIRO, Jan 3 (Reuters) - Brazil's government reduced taxes on foreign investments in private equity funds and some stock investments in a bid to increase long-term financing in the country.

The government cut to 2 percent from 6 percent the so-called IOF tax on foreign exchange transactions by overseas investors into private equity funds, or FIPs, and venture capital funds, according to a decree published on Friday.

The change also affects currency transactions by overseas investors shifting funds from some types of foreign direct investment into stocks, the decree said. Investors bringing money into the country's stock market after canceling depositary receipts abroad will also pay a tax of 2 percent, down from 6 percent.

The government had raised the IOF tax on some investments twice in October, initially doubling it to 4 percent then hiking it further to 6 percent, to curb foreign exchange inflows that had been blamed for sparking a surge in the national currency, the real BRBY.