Fund managers scotch idea of big financial tax rises

The US QE3 programme has been rattling Brazil’s cage (again) with fears of renewed upward pressure on the real. That has been sparking questions over the government’s use of the IOF tax and whether it will be boosted or extended to new asset classes which would hit foreign investors in Brazil.

Advis International, one of the country’s most successful multimercado boutiques, reasons that the government needs foreign investors on team. “The government cares about liquidity in the bond markets. They still want foreign investors and are looking to diversifying bondholders of government debt. Even with rates at the low end of the cycle, Brazil still has to refinance debt and the government is looking to extend duration and needs to diversify the investor base and want to bring in more foreigners.” An increase in the IOF would undermine another aim of the Treasury, namely to issue real-denominated debt in global markets and extend out the curve offshore. “The government will try to hold down the currency using derivatives in the forward markets and accumulating more reserves.”

Bradesco Asset Management (BRAM) takes a nuanced approach. It recognizes that: “Brazil doesn’t need a lot of foreign investment as public debt is decreasing” but believes the government wants the doors to be wide open for infrastructure bond issuance. The ambitious infrastructure programme means the government will seek to minimize the use of the IOF. “The government is trying to create the minimum dislocation and that is the best you can do in the current environment.”

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
This entry was posted in Articles. Bookmark the permalink.

Leave a Reply