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UPDATE 1-Brazil cbank says capital control steps adequate

Published 11/25/2009, 12:22 AM
Updated 11/25/2009, 12:24 AM

* Tombini: Govt review shows capital controls adequate

* Capital controls not aimed at specific level for real

By Rie Ishiguro

Tokyo, Nov 25 (Reuters) - Brazil's recent capital control measures have been adequate in making the country's financial markets more secure, Alexandre Tombini, deputy governor of the Brazilian central bank, said on Wednesday.

Brazil unveiled earlier this month a 1.5 percent tax on certain trades involving American Depositary Receipts issued by Brazilian companies, its second measure in a month aimed at controlling hot money flowing into the economy.

In October, Brazil imposed a 2 percent tax on new foreign purchases of local equities and bonds. Finance Minister Guido Mantega has acknowledged that the government is concerned about the impact of an appreciating real on the Brazilian economy.

Some economists have said they doubt whether the capital controls can put the brakes on the currency, which has appreciated about 36 percent against the dollar this year, or trim gains on the country's main stock index, which has soared about 77 percent this year.

The government said last week that the measures were working well, Tombini told reporters.

"We adopted prudential measures to intensify financial stability," he said.

"This does not aim to target exchange rates. The regime is for flexible exchange rates. What we want is a more secure destination for global investors."

Brazil has joined other developing economies by imposing capital controls to limit short-term speculative money flowing into emerging market stocks and currencies.

The strong real and its impact on Brazil's exporters is also shaping up as a hot-button political issue as the country prepares for a presidential election next year. (Editing by Hugh Lawson) ((rie.ishiguro@thomsonreuters.com; +81 3 6441 1885; Reuters Messaging: rie.ishiguro.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))

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