Brazil's Real Declines Ahead of Voting on Repatriation Billby
Bill could collect less revenue for government than planned
Real posted biggest drop among 16 most-traded currencies
Brazil’s real declined as investors waited for Congress to vote on a bill that may end up bringing in less revenue for the government than initially expected.
The currency declined 0.4 percent to 3.7610 per U.S. dollar Wednesday in Sao Paulo. It was the worst performer among 16 major currencies tracked by Bloomberg.
Brazil’s government is trying to gather enough support in Congress to approve a bill that allows Brazilians to bring money back into the country by paying a fee while averting tax evasion charges. It is part of Finance Minister Joaquim Levy’s plan to narrow the budget deficit.
The currency erased earlier gains amid speculation the government will end up collecting less revenue from the bill. Agencia Estado news agency reported that the government may have agreed to reduce the fee to be paid for repatriating the funds to 30 percent from 35 percent.
"The government giving up on initial taxation expected with the repatriation bill helps to spread negative sentiment in the market," Joao Paulo de Gracia Correa, a foreign-exchange manager at SLW Corretora de Valores, said from Curitiba. "People are waiting to see if the bill is voted today or not."
Legislators have delayed voting on the proposal twice since President Dilma Rousseff’s administration submitted it to Congress in September. The bill will go to the Senate if approved in the lower house.
The real advanced as much as 1.1 percent earlier amid speculation that former central bank head Henrique Meirelles may replace Finance Minister Joaquim Levy, fueling optimism he could conjure the political support needed to pass austerity measures.
Swap rates on the contract maturing in January 2017, a gauge of expectations on Brazil’s interest-rate moves, fell 0.05 percentage point to 15.47 percent.