Foreign accounts have negative balance of $7.253 bi in January

This was the second consecutive month with a deficit

Published in 24/02/2021 - 13:50 By Andreia Verdélio - Brasília

Foreign accounts—which encompass purchases and sales of goods and services and income transfer between Brazil and other countries—faced a negative balance of $7.253 billion in January this year, the second consecutive month with a deficit. In January 2020, the deficit was higher, $10.3 billion.

As per data released today (Feb. 24) by the Central Bank, the reduction in the deficit stemmed from the $1.4 billion and $900 million retractions in net spending for services and for primary income (profits and dividends, as well as interest and salary payments), respectively. A $600 million increase in the balance of trade also played a significant role.

In 12 month-period ending in January this year, the deficit in these current transactions was $9.405 billion (0.65 percent of the gross domestic product, or GDP), compared to a negative $52.755 billion (2.85 percent of the GDP) in January 2020. Regarding the 12 months ending in December 2020, the deficit stood at $12.457 billion (0.87 percent of the GDP).

Investment

When the country posts a negative balance in current transactions, it must cover the deficit with investment or loans overseas. The best form of financing for a negative balance are net revenues in direct investments in the country (IDP in the original acronym), as funds are put towards the productive sector and tend to be long-term investments.

In January 2021, such revenues added up to $1.838 billion, versus the $2.654 billion in January 2020. In the 12 months ending in January 2021, IDP reached $33.350 billion—2.32 percent of the GDP, compared to $69.048 billion (3.73 percent of the GDP) of the 12-month period ending in January 2020.

Even though investments are lower this year, in the 12-month time span, IDP outweighs the deficit in foreign accounts in the period ($9.405 billion), which was also lower because of the crisis brought about by the pandemic.

Translation: Fabrício Ferreira -  Edition: Graça Adjuto / Nira Foster

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