Andre Soliani & Joshua Goodman, Bloomberg, 02/27/2013
As the currency war intensifies in the developed world, the Brazilian official who coined the phrase says for his country it’s softened.
Brazil succeeded in reducing swings in the real after letting the currency depreciate 19 percent in the two years ending in December to protect local manufacturers from foreign competition, Finance Minister Guido Mantega said in an interview. Now with the real hovering around 2 per dollar, Brazil is abandoning policies to depress the exchange rate even as Japan weakens the yen and the U.S. sticks to policies Mantega has said spurred the start of the currency war.
“We haven’t resolved it, but we neutralized, softened the currency war issue that other countries are facing,” Mantega, 63, said at Bloomberg’s headquarters in New York. “We are in Brazil in a transition to a more solid, competitive and efficient economy.”
Posted by Brazil Institute 
Brazil’s currency at 1.70 will always mean intervention
March 2, 2012Kenneth Rapoza – Forbes, 03/01/2012
Anyone who follows Brazil closely should know by now that whenever the Brazilian real hits 1.70 to the dollar, alarm bells go off in the Finance Ministry. It will only be a matter of time before the government intervenes to weaken the real. It’s not a 100% guarantee, though close enough. But if external forces like excess liquidity leading to high commodity prices are in play, then the real will strengthen and the government will be on hair-trigger alert to do something about it. Brazil is getting expensive, and the government does not want to be priced out of the export markets.
As expected, the Brazilian government followed through by extending the 6% financial operations tax, or IOF, on dollar loans from two to three years. This follows from a torrid start to the year, where the Central Bank of Brazil’s data shows that up to February 24 overall inflows to Brazil equaled $12.5 billion this year. The move also follows from last Tuesday’s presentation by Central Bank president Alexandre Tombini before the Senate, where a surprisingly large part of the discussion was dedicated to the possible negative effects of excessive capital inflows and the still very high interest rate spread between Brazil and other major economies.
Brazil’s interest rates are coming down, but in the local economy they are still over 10%. Local currency bonds pay nearly 12% depending on the maturity date. That’s high, even as Brazil’s risk is coming off. For example, in the sovereign debt market (priced in dollars) Brazil’s government bonds yield just under 3.6%. Investors like Brazil’s local government debt better because they get the high yield on investment grade credit coupled with a stable to strong currency that can add to the bonds capital gains.
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