Brazil Adds ADRs to Tax List

Starting today, Brazil will begin taxing the sale of ADRs by Brazilian companies. The move is designed to balance out an October 19 decision to impose a 1.5% tax on inbound capital flows destined for stocks and bonds issued by companies, according to the finance ministry, which posted a statement on the matter Wednesday. Following the October decision, market participants believed the ADR market would grow substantially as issuers sought to access foreign capital by bypassing the Bovespa and going straight to the NYSE with an ADR. Yesterday’s decision by the Ministry of Finance is meant to close the loophole. At the time of the first tax announcement, BMF&Bovespa and other market institutions protested the move saying it would draw liquidity away from Brazil.