Brazil extends foreign loan tax

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Brazil has announced plans to extend the foreign loan tax of 6% for up to five years.

Originally the short-term 6% tax applied to foreign borrowing for as long as two years. However, the tax period has been lengthened as the currency weakens against the US dollar and the economy grows stronger.

As of March 1st it was extended to loans and bonds for a three year duration. It is claimed that the country has done this in a bid to curb the falling value of its currency.

Brazil's real has weakened by 5.6% since the beginning of the month.

The higher tax on loans for a longer period is being implemented to “restrain the foreign capital inflow for short-term investments in the country,”Brazil’s Finance Ministry said.

The central bank has also extended the tax to some loans granted to exporters. According to Bloomberg, investors and exporters have pumped $15.5 billion into Brazil since the beginning of the year with outgoings of £3 billion in the last three months of 2011.

The largest economy in South America, the country’s stilted growth may send inflation levels soaring.

Brazil’s inflation adjusted rate is 3.91%, the second highest after Russia in the Group of 20 most industrialised nations.

Transfer Money to Brazil

If you are looking to invest in Brazil, think carefully about how you will be transferring money to Brazil. Foreign currency exchange rates quoted by banks are almost always worse than the exchange rates available through specialist currency dealers.

So if you are sending money to Brazil – which you will inevitably have to do if you are looking to make a property investment, be sure to compare the market before you buy your overseas currency.

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