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Brazil’s Current Account Deficit Shrinks Further

STAFF REPORT

Brazil’s current account deficit shrank to $2.6 billion in August, about 40 percent decrease from $4.8 billion deficit reported for the same month a year earlier.

The drop has been attributed to the increase in trade surplus and foreign direct investment (FDI).

The current account deficit in July was $3.766 billion, central bank data showed. The country had, however, been expected to post a deficit of $2.4 billion, according to Reuters.

The central bank has also estimated that Brazil might receive a total of $60 billion in FDI this year. The Latin American country’s FDI inflow has increased significantly in recent years, with Chinese companies investing huge sums in metals and mining sectors.

Over the 12 months through August, FDI in Brazil reached $65.8 billion, or the equivalent to 2.8 percent of gross domestic product, according to a report from Dow Jones.

Decreasing interest payments and overseas profit and dividend remittances also seem to have played a part in offsetting the current account deficit.

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According to Reuters, Brazil lured $5 billion in FDI in August, below the $8.4 billion reported for July and slightly less than the $5.5 billion in August of last year.

Brazil expects the FDI to decrease to about $4 billion in September but says current account deficit might remain stable at $2.6 billion.

Flow of FDI reflects strong macroeconomic fundamentals and good prospects of growth, said the central bank in a statement.

Brazil is a large producer of iron ore and agriculture products such as soybeans and corn. Due to severe drought, United States is importing a large amount of corn from Brazil this year. Apart from Chinese companies, many a number of multinationals have invested in the country for exploring its oil and gas reserves.

About Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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