October 21, 2009

Serious intentions or just a one night stand?

Sir Jonathan Wheatley and Alan Beattie in “Brazil taxes foreign portfolio flows in bid to stem exchange rate rise”, October 21, make a reference to the Chilean capital controls, and it is important to understand that these were of quite different nature than Brazil’s tax.

Chile’s capital controls, intelligently, wanted to make certain that the foreign investments flows wanting to go in into Chile, as pretenders, had serious long term intentions, and were not just looking for any one night affairs. It was therefore based primarily on freezing the use of funds for one year, so as to assure a proper courting.

Compared to that, Brazil’s 2 percent tax, just raises the price of having an affair in Brazil. And what is 2 percent in these days of hedge-funds fees if the signorina is beautiful?