Scott Martin: Another BRIC heard from in the race to stimulate local markets and keep foreign capital flowing: Brazil has eliminated the 2% tax on foreign investment in stocks.
This is major news for the market, effectively giving U.S. traders a 2% bonus for sending their money to Brazil — or more to the point, taking away a 2% drag on the Bovespa.
Brazil (NYSEARCA:EWZ) has done several things on the tax front over the last few years to keep foreign money out and keep the local real currency from appreciating even faster. The country has bad memories of inflation and a rising currency was not helping the situation.
But now, after a major pullback and blowout in the real — which you can see from a look at the WisdomTree Dreyfus Brazilian Real ETF (NYSEARCA:BZF) — the government is now eagerly courting foreign capital at last.
Between this and the 50-basis-point interest rate cut overnight, the Bovespa has an extra 2.5% worth of stimulus on its table. No wonder the EWZ is up 1.5% again today even when Wall Street is sliding.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.