The “hot money” phenomenon in Brazil

Vol. 32 No. 3 (2012)

Jul-Sep / 2012
Published July 1, 2012

How to Cite

Gaulard, Mylène. 2012. “The ‘hot money’ Phenomenon in Brazil”. Brazilian Journal of Political Economy 32 (3):367-88.

The “hot money” phenomenon in Brazil

Mylène Gaulard
Research professor of International Economics, ISTOM, School of Engineers in International Agro- Development, Paris (France),
Brazilian Journal of Political Economy, Vol. 32 No. 3 (2012), Jul-Sep / 2012, Pages 367-388


Because of its high interest rates, Brazil attracts more and more speculative capital flows, called “hot money”, under the form of foreign loans, direct or portfolio investments. Actually, the country is directly involved in a carry-trade strategy that tends to appreciate the real, what penalizes the Brazilian exportations of manufactured products. Moreover, capital inflows are extremely volatile, and their departure, causing a fall in loans granted to the Brazilian private banks, could provoke a dangerous burst of the speculative bubble they have contributed to form in the Brazilian real estate sector. 

JEL Classification: F32; E44; O54.

Keywords: Brazil carry-trade capital inflows speculative bubbles