BRAZIL CENTRAL BANK CHIEF: MORE TAX ON INFLOWS A POSSIBILITY

London-Brazilian Central Bank President Henrique de Campos Meirelles said Tuesday that imposing higher taxes on flows into the South American country remains a possibility.

"Brazil already has a financial tax on the inflows of 2%, and it's always an open possibility," he told reporters when asked whether the government is considering further taxation of inflows to stem the appreciation of the local currency.

"I think the [finance] minister has already stated that it's always something that can be used if necessary," Mr. Meirelles said.

Brazilian Finance Minister Guido Mantega said Monday that the world is involved in a "trade war and an exchange rate war" as countries manipulate their currencies for trade advantage, and that Brazil must take steps to defend itself.

While Brazil won't slap any direct tax on foreign investments, the government may consider introducing other taxes on investments to try to limit the real's gains, he said.

Brazilian authorities will also buy more dollars through the spot market to help stem the currency's gains, Mr. Mantega said.

Mr. Meirelles, who is in London to meet international investors, said countries shouldn't have to pay the price for weaker currencies elsewhere, either due to economic situation or because some countries have weakened their currencies to remain competitive.

He said countries could take their own measures against the problem, but that the issue should also be discussed at the level of the Group of 20 industrialized and developing nations.

"I think it's an important subject to be addressed there (G20), what kind of more proactive action can be taken—that is a much more open subject," he said.

"I hope that the discussion progresses and goes well in the G20, but it's premature to say that," he said.

Mr. Meirelles said Brazil would lose competitiveness if the real was excessively overvalued, adding that the current account deficit may widen rapidly, posing problems in the future.

"I personally don't tend to use adjectives ... but evidently I would say there is a very serious currency problem which should be addressed," he said.

"We agree (with Mantega) that it's a very serious problem and that Brazil is not going to pay the price for that," Mr. Meirelles said.

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