WhyBrasil

“Budget Deficit In stepping up intervention, Meirelles, 65, is adding to a budget deficit that reached its widest level in eight months in July. As the dollar purchases swell the central bank’s foreign reserves to a record 7 billion, the government turns over bonds to the bank that allow it to operate in financial markets and prevent the money supply from surging. With Brazilian two-year notes yielding 11.49 percent, or 11 percentage points more than similar-maturity U.S. debt, the country loses money on the transaction, tacking about 24 billion reais a year to its deficit, according to Nathan Blanche, co- founder of Tendencia, a Sao Paulo-based economic research company.”

– Buying Billion a Day Swells `Fiscal Cost’ for Meirelles: Brazil Credit – Bloomberg