Meirelles Says Investors May Create Brazil Bubble (Update1)

Nov. 4 (Bloomberg) -- Brazilian central bank President Henrique Meirelles said “exuberant” investors might create an asset bubble in Latin America’s biggest economy.

“In terms of asset bubbles, stock market, et cetera, I think that might happen, but evidently it’s up to investors not to get too exuberant,” Meirelles said in an interview today with Bloomberg Television in London.

The central bank’s president said it’s unlikely the country will experience “the most dangerous” form of bubble -- a credit-driven one. “We have very strong prudential regulations in Brazil and I don’t think that’s going to happen.”

Finance Minister Guido Mantega last month imposed a 2 percent tax on foreign purchases of equities and fixed income securities in a bid to fend off speculators. Brazil’s currency and Brazilian stocks have had world-beating rallies this year.

The Bovespa Stock Index has gained almost 130 percent in dollar terms this year, including at 2 percent climb today to 63,910.51 at 3:10 p.m. New York time.

The real has gained 35 percent this year -- the best performance among the 16 most-traded currencies tracked by Bloomberg -- and strengthened 1.4 percent today to trade at 1.7207 per dollar at 3:10 p.m. New York time.

Brazil’s top economic policy adviser, Nelson Barbosa, told reporters today in New York the real needs to weaken as much as 19 percent against the dollar for sustainable economic growth.

An exchange rate of 2.10 to 2.13 per U.S. dollar would be best for growth, Barbosa told reporters at an event in New York.

To contact the reporter on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net; Juan Pablo Spinetto in London at jspinetto@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden in Ottawa at barden@bloomberg.net