Brazil’s Ministry of Finance released a statement last week explaining its plan to stabilize the country’s national currency. According to the release, the currently enacted transaction tax on obtaining international loans would be scaled back to exclude short-term loans.
Finance Minister Guido Mantega explained that the aim of the tax cut was to normalize the currency market – not to tame prices.
“This measure is not directed at inflation,” Mantega said, as reported by MercoPress. “We do not administer our currency to control inflation.” Mantega added that the biggest impact of the measure will be to help smaller banks to get cheap loans abroad.
According to the news source, the tax in question is locally referred to as IOF. Previously, the IOF was applied at a rate of 6 percent on the value of any international loan with a maturity of longer than six months. Now, that time frame will be increased to one year.
Even though Mantega specifically said that the reduction of the IOF was not intended to ease inflation, economic experts in Brazil suggest that this might not be the case. However, Mantega explained that the government was taking other steps to address the inflation issue in Brazil.
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