The Bovespa index surged to a two- week high after Brazil eliminated a tax on foreigners' stock purchases as part of measures to shore up growth amid the global economic slowdown.

Brazil's benchmark equity gauge rose 2.2 percent to 58,145.84 at 4:32 p.m. in Sao Paulo. Fifty-seven stocks climbed on the index, led by exchange operator BM&FBovespa SA, while 11 fell. The real gained 0.4 percent to 1.8021 per dollar after the central bank cut its lending rate yesterday.

Brazilian Finance Minister Guido Mantega is scrapping the so-called IOF tax on foreigners' equity purchases two years after he implemented it to curb investment in the country's financial markets and stem a currency rally that was crimping exports. Concerns about the real's strength have eased after it plunged 13 percent in the past four months as Europe's debt crisis eroded demand for emerging-market assets.

"It simplifies our lives and saves us a bit of money," said Urban Larson, who helps manage about $2.2 billion in emerging-market assets at F&C Management Ltd. in London. "Does it dramatically change our view of Brazil? No, but it's definitely positive."

Brazil is keeping the 6 percent tax on foreigners' fixed- income investments.

Together with the reduction in the IOF on foreign investment in stocks, Brazil is cutting taxes on home appliances and staple foods to help meet a target of 5 percent growth next year, Mantega told reporters in Brasilia today.

David Fuller's view Previously, this tax gave investors a good reason to shun South America's BRIC.

Brazil's central bank cut interest rates yesterday, the third reduction this year.

I think Brazil is leading a new cyclical bull market for the BRICs (see also chart comment on the IBOV Index below).