Brazil's battle to slow a recent rally in its currency is jeopardising plans to open the real to international trading. With a view to one day becoming a major financial hub with as much clout as Hong Kong or New York, Brazil has been working to transform the real into a so-called convertible currency.
That means putting behind it a past of painful currency crises and lifting heavy restrictions on the real. But in recent months the government has taken a step backward, introducing even more regulation to the market in an effort to curb a currency rally that is hurting exporters and undermining the competitiveness of the Brazilian economy.
"It makes policymakers more reluctant to pursue full convertibility under these circumstances," said Mike Moran, a senior currency strategist at Standard Chartered in New York.
"They will continue to say this is their long term goal, but in the immediate future, the prospect for full convertibility for the likes of Brazil is very weak."
Currently, the central bank permits only a few big banks to trade in the local market, making foreign exchange transactions more costly and time-consuming for everybody else. But if these restrictions were lifted, Brazil's currency problems would be even worse, some analysts say.
Foreign investors have flocked to Brazil partly due to its high-yielding bonds. The deluge of cash has boosted the real, making it one of the world's most overvalued currencies.
"Convertibility? Forget about it," says Carlos Gandolfo, a partner at Sao Paulo's Pioneer brokerage. A freely tradable real would attract even more hot money, or "motel money" as it is known locally - thrill-seeking investors who are in and out of the country in hours.