The amount of money that has left the country in December has reached almost $6bn, compared with just under $2bn in November.
The capital flight has topped the amount of emergency finance Brazil has so far received under a $41.6bn rescue package led by the International Monetary Fund, announced at the beginning of December.
The faster pace of capital outflows reflects both year-end adjustments by foreign investors choosing not to roll over maturing debt, and nervousness about whether the country will satisfy the terms of the IMF-led loans. These require a huge cut in the government's budget deficit, but earlier this month the Brazilian Congress rejected proposals for narrowing the gap between spending and revenues. New proposals are due to be debated in January.
However, with interest rates at 30 per cent to protect the currency's peg against the US dollar, Brazil faces a deep recession. This is making many politicians unwilling to agree to the spending cuts required by the IMF programme.
But the Fund's credibility is at stake as it was criticised for its handling of the Asian crisis. A renewed crisis in Brazil would prove deeply embarrassing.
The US Treasury is also determined to make a success of the Brazilian rescue. "If Brazil hits trouble, the rest of Latin America would pick up the contagion, and US banks are particularly exposed to the region," said Stephen Lewis, chief economist at Monument Derivatives.
The Sao Paolo Bovespa index fell 2.7 per cent yesterday, after a near 4 per cent decline on Monday.Reuse content