Pressure is mounting on the Brazilian government to "do something more" about the real. The Ministry of Finance has already doubled its financial transaction tax (IOF) to 4% and is mulling a number of other measures: these include further increases to the very same IOF, raising margins on futures, limiting banks' FX exposure, and discouraging short-term inflows into portfolio investments with a tax rate that falls the longer investments are held.
Itamaraty, the Ministry for foreign relations, is humming and hawing between blaming the Americans for rock bottom rates (and now quantitative easing) or the Chinese for keeping their currency low. Recent pronouncements suggest the Americans are getting more of an earful while Brazilians consider how to combat China's ever-deeper penetration into Brazil's industry (they already dominate clothes and shoes and are quickly entering machinery).
The debate has re-opened rifts between the Ministry and the Central Bank. The Ministry has long taken a dim view of the high rates imposed by the Bank arguing that they are unnecessary. The Bank is taking an altogether more sanguine approach to the currency fuss and focusing on longer-term measures with a focus on reducing interest rates to make capital inflows into Brazil altogether less attractive.
With the second round of Presidential elections slated for the end of the month and a new government only in January, coherence is not to be expected from Brasilia. The Ministry of Finance and Central Bank are pulling in different directions and Itamaraty is showing its knee jerk anti-Americanism. There is a lot of room for bad and contradictory policy decisions.