In a move to halt the excessive appreciation of Brazil‘s real, the Brazilian government announced on Thursday changes in the incidence of the Tax over Financial Operations (IOF) charged to foreign investments.

Last April, the government raised to six percent the IOF charged over short-term foreign investments that leave the country within two years. Now, the government extended the six percent IOF to foreign loans and bonds that exit Brazil within three years. "We are discouraging the inflow of short-term capitals in Brazil, " said Finance Minister Guido Mantega.

According to him, there is currently excessive liquidity in the international market. In the first two months of 2012, the U.S. dollar depreciated 7. 95 percent against the real, and the real-dollar exchange rate reached 1.70:1. The weaker dollar has stimulated Brazil‘s imports but made exports more difficult, damaging the local industry.

Mantega said the government will keep monitoring capital inflows and may take additional measures if necessary. However, the minister denied plans to tax foreign direct investments, which target mainly the productive sector.

"Productive investors are welcome, but speculators will be penalized," he added.