Moreover, companies in countries where financial markets are heavily regulated can often circumvent the regulations by borrowing offshore.

ECONOMIST: The case for mild repression

The Finance Minister, Guido Mantega, announced after market hours Wednesday that Brazil was extending to 720 days from 360 days its recent 6% financial operations, or IOF tax, on local institutional dollar borrowing from offshore subsidiaries in an attempt to cut into credit expansion and dollar inflows.

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This can cause a company to locate more of its borrowings offshore, which can increase borrowing costs.

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