Brazil interest rates hike fails to staunch dollar hemorrhage
RIO DE JANEIRO, Jan 20 (AFP) - The outflow of dollars leaving Brazil has not been stemmed by Monday's hike in interest rates, according to Central Bank figures released Wednesday.
Some 347 million dollars left Brazil Tuesday, according to Bank figures, despite Monday's decision to float the real and widen the band of interest rates to 25-41 percent from 29-36 percent.
Some six billion dollars have left the country since early January.
Once the Bank let the real float, the importance of increasing the interest rate became holding back inflation, said Camila de Faria Lima, a top economist with Banco Santander in Sao Paulo on Wednesday..
Fernando Bezerra, president of the National Industries Confederation (CNI), considers the interest hike a transitory "necessary evil."
"Let's not fool ourselves, the rates are not going to go down in the short term," Bezerra said.
The real, after some initial fluctuation Tuesday, settled at 1.50 to 1.55 to the dollar -- close to its range Monday -- after having lost some 20 percent of its value over the past week.
The interest rate hike indicates that the government is shifting its focus from defending the real, a policy that can eat up valuable economic reserves.
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