Brazil posts $855 million deficit in external accounts

Brazilian external accounts closed out March with a deficit of $855 million, according to figures from the Central Bank released today (Apr. 20). The balance is the lowest value for current transactions—goods and services bought and sold and income transfers between Brazil and other countries—since August 2009, when it stood at $828 million.

In the first quarter this year, the gap totaled $7.591 billion, compared to the $25.099 billion in the same period in 2015.

In the balance of current transactions, the account for primary income (profit and dividends, interest and salary payments) showed a negative $2.449 billion.

As for services (international travel, transport, equipment leasing, insurances, etc) contributed to the deficit, with a negative $2.904 billion.

Regarding the account secondary income (income generated in one economy and distributed in another, like donations and dollar remittances, with no services or goods returned in exchange), the result was a positive $240 million.

The balance of trade contributed to reducing the whole in the external accounts by posting a $4.258 billion surplus.

Tulio Maciel, head of the Central Bank Economic Department, notes that the positive result in the balance of trade was the main factor helping reduce the gap in current transactions. “It helps mitigate the shrinkage in the country's economy,” he argued.

Direct investment

Nonetheless, the country spent beyond its income. When this happens, the negative outcome must be compensated for with foreign investment or by borrowing from abroad. Direct investment in the country (referred to as IDP)—funds that enter Brazil and are sent to the productive sector of the economy—is usually preferred for being a long-term method for funding.

Last month, the IDP reached $5.557 billion and was more than enough to cover all of the whole in current transactions. In the first quarter, investment amounted to $16.933 billion.

In Maciel's view, the flow of direct investment has proved “rather resilient to any period of uncertainties.” “Levels were steadily high,” he added. Maciel went on to state that the country is still a major consumer market, with 200 million of inhabitants. “This is undoubtedly a key point in the analysis of direct investment. Also, the floating exchange and the economic activity situation have made assets more attractive to the foreign investor,” he added.

The country also registered an inflow of investment for stock traded in the stock exchange in Brazil and overseas, and also in investment funds, totaling $2.027 billion in March, and $2.901 billion in the first quarter of 2016.

As for the total net investment leaving Brazil in the form of bonds traded in the country, a total $1.965 billion was observed last month, and $7.070 billion from January to March this year.

Translated by Fabrício Ferreira