Brazilian Government's Policy Response To The

By Walter Douglas Stuber and Ricardo Baraldi Macedo 1

I - Introduction

Brazilian stock and currency markets have taken a battering in the last 3 (three) weeks as international investors pulled out of emerging markets to cover losses in Russia and take refuge in safer instruments such as the US Treasuries.

The abrupt outflow of foreign capital, as the expression of the worldwide mistrust in relation to emerging markets, reached in Brazil the impressive amount of 19 (nineteen) billion dollars so far.

In order to contain such accelerated capital outflow triggered by the Russian fallout, Brazil's Government has recently announced a set of rules to draw dollars into the country and thus bolster as well as maintain its foreign currency reserves to protect the Real.