Brazil’s financial markets took a tumble on Tuesday as the Government erected a speed bump in the path of foreign investors, taxing their purchases of Brazilian stocks and bonds.

The new levy of 2 per cent, imposed on Tuesday, is intended to put a lid on the soaring value of the Brazilian currency, which has been driven up by inflows of capital from foreign investors. News of the tax arrested the upward march of the Bovespa Index, Brazil’s stock market barometer, and pummelled the real, which fell 2.3 per cent against the dollar to 1.752 reals.

The real has risen by more than a third against the dollar this year, creating anxiety among Brazilian exporters, who fear a loss of competitiveness.

The Bovespa fell by 4.7 per cent as traders marked down the value of Brazil’s big companies, including Petrobras, the national oil company, and Vale, the mining giant.

In an effort to reassure investors, Guido Mantegna, the Brazilian Finance Minister, said that the levy would affect shares and fixed-income investments such as government bonds, but would not hurt foreign direct investment into businesses and assets. “We will continue to encourage foreign investment. Our concern is with excessive speculative investments, short-term capital that would cause a bubble,” he said.

Excitement over the rapid resurgence of Brazil’s economy has encouraged investors with spare cash to find a home for their money in Brazil’s hot markets. The Bovespa index has risen by 79 per cent this year.

Brazil’s stockbrokers expressed concern that the tax would shift trade in Brazilian shares offshore to New York, where foreign investors can buy and sell American Depositary Receipts in Brazil’s biggest companies.

Some analysts suggested that the tax was political, designed to appease Brazil’s exporters, but would have little impact on the upward drift of the real. “We think it will be quite ineffective,” André Loes, chief economist for HSBC in Brazil, said.

Foreign portfolio investment in stocks and shares is about $17 billion (£10.4 billion), Mr Loes said, whereas foreign direct investment (FDI) is almost twice that amount. “The Government will not tax FDI,” he said.

Foreign investors have flocked to Brazil, chasing its abundant natural resources and big companies, such as Vale and Petrobras. The latter’s shares have climbed by almost two thirds since January, boosted by rising oil prices and a clutch of multibillionbarrel Brazilian offshore oil finds.

The share and bond levy also drew criticism from the International Monetary Fund, which said that taxes on capital inflows were difficult to implement and should not be used to postpone the need for more fundamental adjustments.

The recent collapse in the dollar has been causing pain in all emerging markets and among exporters of dollar-priced commodities, such as oil and metals.

Brazil’s central bank has been buying dollars in an attempt to slow the upward momentum of the real.

Mr Mantega said that the central bank would continue to buy dollars to bolster its foreign exchange reserves, which have surged to a record high of $232.3 billion.

Separately, Vale said that it would boost its spending programme next year by 30 per cent to $12.9 billion.

The iron ore giant has recently been criticised by President Luiz Inacio Lula da Silva, who accused Vale of not doing enough to stimulate economic development in Brazil. Roger Agnelli, Vale chief executive, said it was the largest investment carried out by a private company in Brazil.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax