EMERGING MARKETS-Brazil real shrugs off new tax; pesos mixed

* Tax on foreign borrowing not seen hurting real

* Brazil real firms 0.24 pct, Mexico peso flat

By Silvio Cascione and Michael O’Boyle

SAO PAULO/MEXICO CITY, March 29 (Reuters) – Brazil’s real
on Tuesday shrugged off the government’s latest effort to
curb financial flows that have inflated the currency’s value,
although authorities could step up efforts.

Brazil’s government on Tuesday raised a tax on foreign
borrowing for loans of up to 360 days. [ID:nN29248075] But the
move had been widely expected by financial markets. Some had
feared the government could take more drastic measures.

“This measure will not make any difference,” said Flavio
Serrano, senior economist at Espirito Santo Investment Bank.

The real (BRBY: Quote, Profile, Research) firmed 0.24 percent to 1.656 per dollar on
the local spot market.

The country’s finance minister called a press conference
for after 12:30 local time (1530 GMT).

Financial flows into Brazil have been tempted by the huge
spread between interest rates in developed markets and
Brazil’s double-digit rates.

In October, Brazil tripled to 6 percent the so-called IOF
tax it charges foreigners when they buy local bonds.

But analysts said the lack of a tax on locals was allowing
domestic banks and companies to borrow abroad, invest in
Brazil’s high-yielding debt and pocket the difference between
interest rates.

Analysts said market players would likely find ways around
any new measures, short of a broad flat tax on all inflows.

“We are skeptical that this new measure will change the
trend of (the real’s) appreciation,” Barclays Capital wrote in
a note to clients.

Barclays noted much of current and future inflows would
likely be related to equity investments, which are only taxed
at a rate of 2 percent.

The real has firmed about 5 percent from a November low
despite increased government and central bank efforts.
However, analysts said the government could try more measures
if the real firms back past 1.65 per dollar.

Mexico’s peso (MXN=: Quote, Profile, Research) traded flat around 11.9750 per
dollar. The cost of dollars in pesos could not push through
support at 11.95 per dollar, and pulled back after weak data
in the United States, Mexico’s top trade partner.

Data showed U.S. consumer confidence fell in March as
households worried about inflation, while home prices fell for
the seventh straight month in January, pointing to a loss in
momentum in the economy. [ID:nN29268691]

Mexico’s peso hit its strongest in nearly 2-1/2 years this
month on signs of recovery in the United States, which buys
most of Mexico’s exports.

Chile’s peso (CLP=CL: Quote, Profile, Research) bid 0.33 percent weaker to 481.90
per dollar, hurt by a fall in the price of copper, the
country’s main export.

Peru’s sol edged back after it slumped by the most in
nearly two years in the previous session following polls that
showed a left-wing nationalist presidential candidate leading
the race. [ID:nN28200405] and [ID:nPOLLSPE]

The sol (PEN=PE: Quote, Profile, Research) firmed a slight 0.07 percent to 2.811 per
dollar as it edged back from its weakest close since December
in the prior session.
(Editing by Jan Paschal)

EMERGING MARKETS-Brazil real shrugs off new tax; pesos mixed