RIO DE JANEIRO, June 12 (Reuters) - Brazil will scrap a tax on foreign-exchange derivatives, Finance Minister Guido Mantega said on Wednesday, the latest move to lift capital controls and bolster a weakening currency that threatens to stoke an already high inflation.
First used in July 2011, the 1-percent financial-transaction tax, or IOF, was levied on some U.S. dollar futures opeations. It was used to hold back a flood of capital from liquid global markets that caused Brazil's currency, the real, to appreciate sharply, undermining the export competitiveness.
Brazil has now reversed course, undoing many of its capital controls on the expectation of tighter monetary policy in the United States. Expectaion of such changes have dragged its currency to four-year lows.
'This will free the market, remove some of the locks that we put in place before,' Mantega told reporters in a press briefing late on Thursday, adding that after the measure there will remain no other IOF tax on foreign exchange derivatives.
The measures will take effect on Thursday, Mantega said.
Foreign exchange derivatives are usually used by Brazilian companies to hedge, or insure, against exchange-rate fluctuations. Some economists say the sharp appreciation of the greenback could jeopardize the finances of corporations that have large dollar debt.
Other investors use it to bet on whether the currency will strenthen or weaken.
Mantega said the government has kept a 6-percent IOF tax on foreign loans with maturities of less than one year.
(Reporting by Jeb Blount; Editing by Sandra Maler) Keywords: BRAZIL ECONOMY/TAX
(Jeb.Blount@thomsonreuters.com)(+55-21-2223-7143)(Reuters Messaging: firstname.lastname@example.org)
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