Political Risk Latin America Blog @PolRiskLatam

Brazil: nice timing, Mr Mantega

Posted in News and Articles, Political Risk by politicalrisklatam on March 4, 2011

by Jonathan Wheatley for Financial Times – Beyond Brics, March 3rd, 2011.

Just as analysts and investors were digesting the Brazilian central bank’s dovish rate hike on Wednesday night, Guido Mantega, finance minister, has announced a R$55bn ($33bn) transfer of funds from the treasury to the national development bank. He also threatened to restart the currency war.

Not quite the message you want to send on the day investors are wondering just how serious the government is about its promised fiscal austerity. Interest rate futures responded by climbing a wall.

Mantega said the transfers, to be used as subsidised loans for infrastructure and other investment, would cost taxpayers R$4.1bn.

The interest rate futures contract for January 2013 rose from 12.69 on Thursday morning to 12.82 after Mantega’s announcement, before relaxing a little. (continue reading… )

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