Brazilian President Dilma Rousseff is busy dealing with a problem many emerging market leaders would love to have: billions of dollars of unwanted foreign investment flowing into the country, drawn to its interest rates and a strong currency.

By last count net inflows of the U.S. dollar in July reached $15.83 billion while net outflows remained minor by comparison.

The strong currency and the relatively attractive interest rates are proving a magnet for speculative investors with money to stake on profits from attractive margins on the interest rates and the psychological attraction of a strong real, the Brazilian national currency.

Central Bank figures indicated investment inflows of $9.57 billion and trade-related dollar inflows of $6.25 billion during July.

In contrast, net outflows in June totaled $2.56 billion in June, the last figure available.

Brazil has embarked on a series of measures including taxation on local dollar deposits to discourage the inward movement of the dollar investments, which are seen as a growing threat to Brazil's exports.

The Latin American country's commodity exports have been the engine driving the economic growth even as the economy diversifies and Brazil's non-commodity exports show steady growth.

The Brazilian real has gained almost 50 percent against the dollar over the last three years, prompting the government to pour nearly $16 billion into programs to help Brazilian industries cope with the appreciation.

Manufacturing, including expansion of defense industries, has been given a major boost by Rousseff as part of a strategy to reduce dependence on volatile commodity markets.

Net dollar inflows over the past year have exceeded $55.67 billion, more than twice as much as the $24.4 billion recorded for 2010.

Brazil's cash reserves of $347.6 billion sounded better before the U.S. debt ceiling debate, which showed that the Latin American country, the fifth largest holder of U.S. debt, is in the same lineup as China, the world's largest holder of U.S. debt.

Worries over the next direction of the U.S. financial difficulties made headlines because of the Brazilian exposure.

The Brazilian attitude to dollar inflows was mirrored in other Latin American countries.

In Argentina, however, opponents of President Cristina Fernandez de Kirchner said the dollar inflows could be a hedge against uncertainties over Argentine economy and the prospect of Fernandez contesting the next election in 2012.

Argentine business and industry critics of the government say they expect a new Fernandez administration to be tougher on their sectors and increased tax burden all around.

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