LEX 
Brazil is a victim of its economic success. This year its trade-weighted currency has appreciated by 23 per cent, in real terms. Since Luiz Inácio Lula da Silva became president in 2002, it has risen by 62 per cent. This is novel for a country usually associated with debt crises and devaluations. It is also an increasingly serious problem.
One important question is whether the real’s continuing strength is due to a kind of incipient Dutch Disease, driven by Brazil’s huge commodity wealth, or an overabundance of footloose international capital. If the latter, as the government claims, there may be a case for policy action. Hence Monday’s 2 per cent tax on portfolio capital inflows – although few expect the measure to have much long-term effect. A 1.5 per cent tax introduced in March last year, and dropped shortly after Lehman collapsed, did nothing to stem the real’s rise last year.
