BRASIL: Dilma Says She's Serious About Lowering Interest Rates.

REUTERS/ Brian Winter /
    Incoming president Dilma Rousseff has changed her tune about interest rates. The government will soon try to bring its Selic rate down, so its economy doesn't continue to attract "hot money" from developed countries.
    But officials also admit that the bank's Selic rate will  go up before it comes down, due to a recent spurt in inflation.
    Finance Minister Guido Mantega ( pictured) recently announced cuts that would total more than 20 billion reais ($11.6 billion) and Rousseff has requested a "heavy hand" on fiscal spending in both the short- and long-term.

BRASIL: Rousseff Says Bye, Bye Meirelles, Oi Tombini.

BLOOMBERG/ Andre Soliani and Iuri Dantas/
    President-elect Dilma Rousseff has nominated Alexandre Tombini (pictured), 46, as new central bank head replacing long-serving 65-year-old Henrique Meirelles. Rousseff also nominated Guido Mantegna to remain as Finance Minister.
     Tombini has been a central bank board member since 2005.
     “The fact that it is him instead of someone else ensures the central bank won’t be taken by a new heterodox philosophy -- that there will be continuity,” said strategist Tony Volpon.
“Tombini has a good education, he’s a professional,” said economist Pedro Tuesta. "The problem is that this gives the impression that Dilma wants to have greater control of the central bank. I’m not saying that’s the way it is. She gives us that impression, and the impression has a certain base.”

BRASIL: 1ST UPDATE: Central Banker Meirelles Refuses To Stay Unless Autonomy And Permanence Promised.

BBC/LONG PROFILE With Graphs / 
Robert Plummer /
    Longtime Central Bank chief Henrique Meirelles  says he will quit UNLESS President-elect Dilma Rousseff promises him guarantees of “absolute autonomy” and allows him to stay on the job well past the first quarter of 2011. He will meet with Rousseff  next week.
    Meirelles has been monitoring Brasil's inflation rate for nearly eight years.
    The media report that Rousseff wants to lower the high interest rates that Meirelles believes kept Brasil's infamous inflation finally in-check.
    The rumor is that Finance Minister Guido Mantega is safe and has accepted Rousseff’s invitation to remain in his position.

UPDATE, 19 NOV: FOR  MANTEGNA DETAILS , SEE:
http://en.mercopress.com/2010/11/19/brazilian-central-bank-chief-steps-down-from-president-elect-rousseff-s-team

BRASIL: Mantega Fights Surging REAL, Raises Foreign IncomeTax ...Again...To 6%.

BLOOMBERG/
      Finance Minister Guido Mantega has not given-up the fight in his so-called "currency wars."
     He announced that the tax on foreign fixed income, raised to 4% from 2% less than two weeks ago, will increase AGAIN...to 6%. Also a loophole that allowed foreign investors to avoid taxes on margin deposits, especially currency speculation, will be closed.
     Foreign "hot money" has been pouring into Brasil, sending the REAL to a 7.1% gain in just the past three months...and past the psychologically important $1.70 level usd.
     The new higher taxes will affect only new foreign monies.
    Mantega insists : “This currency war needs to be deactivated."

    Meanwhile, market strategist Gaelle Blanchard says Mantega's efforts are FUTILE, for Brasil and the other emerging markets: "They’ve lost the war before it’s even started. Money wants to go somewhere and the yield is in emerging markets. You can’t stop that unless you can also stop broad-based dollar weakness.”

 http://www.bloomberg.com/news/2010-10-19/brazil-emerging-markets-have-already-lost-currency-war-socgen-says.html

BRASIL: Mantega's "Currency War" Backfires As REAL Grows Stronger; Meirelles Hints Of New Measures.

BLOOMBERG/ Ye Xie :
  In late September, Finance Minister Guido Mantega (Pictured) said that he would take measures to curb the REAL’s volatility and limit gains in a global “currency war.” So far he’s failed.
 Instead, the REAL is heading toward its eighth straight weekly advance, the longest streak since 2004, and has surged 38 percent since the beginning of 2009. It has gained 111 percent since President Lula da Silva took office in 2003, the most in the world.
  Meanwhile central bank president Henrique Meirelles stated that: “Brasil cannot pay an excessive price for the fact it’s doing well while others are doing badly. Many countries started to take measures in this regard and, evidently, Brasil needs to take its measures to protect itself from these imbalances.”

MONETARY POLICY: IMF Boss Says Global Currency War "Can't Be Ruled Out."

AFP/ Hugues Honore and Andrew Beatty/   
     IMF managing director Dominique Strauss-Kahn
(pictured) says that the risk of a global currency war is "low" but can't be ruled out.
   "I think the probability is rather low, because everybody can understand that too big conflicts... will have a negative impact. Nevertheless it may happen," he said.
   Strauss-Kahn was addressing a charge made recently by Brasil's finance minister Guido Mantega who is disturbed at the rising real's impact on his country's exports.
"We're in the midst of an international currency war," Mantega said. "This threatens us because it takes away our competitiveness."
     In what may be another version of beggar-thy neighbor, many nations are buying up local currency to drive down its price and make exports cheaper. It is also a reason for the soaring price of gold as investors see many currencies being devalued.

BRASIL: Spending Cut By $5.7 Billion...To Cool Demand.

BUSINESSWEEK/       Finance Minister Guido Mantega says the government will cut spending by $5.7 Bn to cool the economy but  it will not affect social programs or infrastructure. Inflation has exceeded the government’s goal of 4.5% every month this year. The $5.7 Bn cut announced is in addition to a 21.5 billion-real cut disclosed earlier this year.

BRASIL: Finance Minister Mantega May Impose Import Levies.

MERCOPRESS/    Finance Minister Guido Mantega believes that a strong Real puts Brasil at a disadvantage by making goods more expensive in dollar terms so he is considering increasing levies on imported goods. Mantega maintains that the US dollar is undervalued. “Every time the dollar weakens, it causes foreign exchange imbalances in the world,” Mantega said. “This is worsened by the fact that the Euro is also undervalued and some Asiatic currencies are pegged to the dollar and therefore weaken together.”

BRASIL: Rousseff To Retain Lulu's Key Policymakers.

REUTERS/

High government sources report that Dilma Rousseff will retain an economic team that known to investors if elected president in October, including Finance Minister Guido Mantega, one of Lula's closest confidants; the president of state development bank BNDES Luciano Coutinho; and Petrobras chief executive Jose Sergio Gabrielli.

BRASIL: Lula May Increase Foreign Investment Tax To Weaken Real.

BLOOMBERG/
Speculation has increased that the government may increase a recently enacted tax on foreign purchases of stocks and bonds to stem the real’s appreciation.
“Administrative measures can be announced at any moment,” said Paulo Nepomuceno of Coinvalores CCVM. The government plan reportedly is ready and will be announced if the real closes another day under 1.7 per dollar.
“We want foreign capital for direct investment, for stocks and for financial investments but without exaggeration, to make sure there will not be a bubble in stock markets or excessive valuation of the Brazilian currency,” said Finance Minister Guido Mantegna.

BRASIL: Lula, Mantegna Predict A Bright Economic Future.

BBC/
"At present, Brazil is the fifth-largest country in the world and has the fifth-largest population as well.
But in 17 years' time, it will also be the fifth-largest economy in the world, says its finance minister, Guido Mantega."

BRASIL: Mantegna Claims Inflow Tax Will Prevent Bubble.

BLOOMBERG/
Brasil's Finance Minister Guido Mantega believes the nation's 2 percent tax on capital inflows will help prevent the formation of an asset “bubble.”
The tax on foreign purchases of equities and fixed-income securities was added last month to fend off “excess speculation.” The country’s currency and stocks have had record rallies this year.
The so-called IOF levy has been “sufficient” in eliminating “excessive interest in Brasil capital markets, Mantega believes.

Brasil's Mantegna: Business "Crying With A Full Belly" About New Tax.

MERCO PRESS/
Brasil's Economic minister Guido Mantega said that the financial sector was “crying with a full belly” over a capital tax levied this week to prevent a foreign exchange bubble between the Real and the US dollar.
“They are crying with a full belly because never before in the history of the Brasilian stock exchange has there been such a fantastic expansion. Today it has become one of the largest and main markets of the world thanks to the administration of President Lula da Silva. You can’t have all”, said Mantega.

Brasil May Boost Petrobras Stake.

WSJ ONLINE/
Brasil's government will likely boost its stake in state-run Petrobras since minority shareholders are unlikely to fully subscribe to the company's planned share offer.
The share offer is part of a complicated government plan to give Petrobras with the capital needed to develop recently discovered ultra-deepwater oil reserves. Minority shareholders "have the right to subscribe to up to 60% of the capital increase. They will have a term of 30 days to decide, but probably will not completely exercise their rights because it's a lot of money," Finance Minister Guido Mantega said during congressional testimony.

Reaction To Brasil's New 2% Tax On Foreign Capital Inflow; Stocks, Real Drop.

WSJ ONLINE Link/ BLOOMBERG Update/
Brasil's 2% tax starting today on all foreign investors for Real-denominated, fixed-income securities and stock purchases “to avoid an excess speculation in the stock market and in capital markets" brought swift market reaction.
Brasil's stocks dropped the most in four months and the Real tumbled. The Bovespa exchange plunged 11 percent on fears the tax will curb trading. Petrobras and Vale, the most heavily weighted stocks on the index, retreated more than 3.3 percent.
“Unfortunately this is going to raise in some people’s mind that Brasil remains a risky place to do business,” said Christopher Palmer of Gartmore Investment. “How many countries in the world are proposing capital control?”

Brasil To Buy $10 Billion In IMF Bonds.

BLOOMBERG/
Brasil's Finance Minister Guido Mantegna says that Brasil will buy up to $10 billion in debt from the IMF, turning the country into a net creditor of the IMF for the first time.
Brasil will buy the two-year bonds denominated in the IMF’s special drawing rights, with quarterly interest payments based on the weighted average of the short-term rate in the U.S., the euro region, Japan and the U.K. That rate currently stands at 0.25 percent.

Brasil's Cost To Exit Recession Was "Very Cheap."

MERCOPRESS/
Brasil's Minister of Finance said that the global crisis had “very low cost” for Brasil which last week announced the end of its recession.
“Our fiscal cost was very low, between 15 and 30 billion US dollars. It was cheap”, said Guido Mantega.

Brasil And Argentina Agree To Swap $1.8 Billion In Currencies.

LAHT.

The agreement to swap $1.8 billion in currencies must be validated by the central banks of both countries. Then Argentina will be able to access 3.5 billion reais while Brasil will be able to use 7 billion Argentine pesos.

“This is another significant step towards financial integration of the two countries, following on the path of strong trade and political integration”, said Brasil's Finance Minister Guido Mantega.

Government Officials Scold Brasil's Private Banks Over Low Lending.

REUTERS.

Brasil finance minister Guido Mantegna, the chief executive of state-run Banco do Brasil, prodded private-sector banks to increase lending and lower interest rates to further the country's economic rebound.

He accused private banks in Brazil of putting profits ahead the nation's economy and said they should lower borrowing costs or risk losing market share.