Bloomberg News

Brazil’s Current Account Gap Widened to a Record in January

February 24, 2012

(Updates with record size of deficit in first paragraph.)

Feb. 23 (Bloomberg) -- Brazil’s current account deficit in January was the widest on record after the real appreciated the most of any major currency this year.

The deficit in the current account, the broadest measure of trade in goods and services, rose to $7.1 billion from $6 billion in December, the central bank said in a report distributed today in Brasilia. Analysts surveyed by Bloomberg expected a $7 billion gap, according to the median forecast of 13 estimates.

Foreign direct investment fell to $5.4 billion from $6.6 billion over the same period, the central bank said. The figure was higher than the $4.6 billion median forecast of eight economists surveyed by Bloomberg.

The real has strengthened 9.6 percent against the dollar this year, the most of 16 major currencies tracked by Bloomberg. Brazil’s Finance Ministry said Feb. 17 that the government is ready to take new measures to guarantee a competitive exchange rate, though it denied a report in Veja magazine that this could include a tax on foreign investment.

Brazil’s central bank cut its benchmark interest rate by 50 basis points for a fourth consecutive meeting last month, pushing it to 10.50 percent, and signaled it will continue to lower rates at the current pace. The economy’s recent “below potential” growth has opened up space for further cuts without stoking inflation, central bank President Alexandre Tombini said in Mumbai this month.

The yield on the interest rate futures contract maturing in January 2014, the most traded in Sao Paulo today, rose 5 basis points, or 0.05 percentage point, to 9.67 percent at 10:53 a.m. Brasilia time. The real strengthened 0.1 percent to 1.7036 per dollar.

--With assistance from Dominic Carey in Sao Paulo and Andre Soliani in Brasilia. Editors: Harry Maurer, Philip Sanders

To contact the reporter on this story: Matthew Bristow in Brasilia at mbristow5@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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