Brazil will extended a 6 percent tax known as the IOF on overseas loans with maturities of up to five years, local newspaper Folha De S.Paulo reported on Saturday. The tax had previously been charged when companies in Brazil took foreign loans maturing up to two years, but was extended to three years on March 1. The change will be enacted at the beginning of next week, the newspaper reported, without citing sources.
The government of President Dilma Rousseff is worried that an appreciating real, fuelled by foreign cash inflows into domestic financial markets, could derail a feeble recovery in Latin America's largest economy and weaken the competitiveness of already struggling industry. Brazil has a long history of tweaking the IOF tax to try to limit or woo capital inflows.