The latest wheeze to lift the gloom of Brazil's MBS market - exempting securitized, real estate-based receivables from the CPMF financial operations tax - seems doomed to failure.

The tax hits a transaction three times over: when the company captures resources by issuing titles, when it buys a portfolio of receivables, and when it amortizes the principal of the debt and pays interest. "This kills the operation," said Andre Arco Verde, funding manager of the Companhia Brasileira de Securitizacao (Cibrasec). "In a capture operation of R10 million, for example, the value of the tax bite is R97,800, which rises the total cost to R131,000, including expenditures with the Securities and Exchange Commission and other agencies."

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