Brazil Posts a Current Account Deficit in November, but Should Record a Big Surplus for the Year

Brazil reported a deficit of $242.2 million on its current account in November. However, for the eleven months of the year, there is a $10,564 million surplus. For the year as a whole Brazil is likely to chalk up a record surplus. For the first eleven months of 2003, Brazil had a surplus of $3,669 million and a surplus of $4018 million for the whole year.

Typically, an emerging country like Brazil tends to have a deficit on current account as a result of the inflow of foreign investment into the country. Indeed, except for the last two years, Brazil has generally, since 1980, run current account deficits.

Among the factors that may account for the recent change in the current account from deficits to surpluses is the faster growth in exports relative to imports, which could have some lasting significance, but capital flows may have had a greater impact. Capital flows, however, are apt to change significantly and capriciously from time to time as can be seen in the comparison of some of the major components of the financial account between the first eleven months of this year with the comparable period of 2003.

For the first eleven months of this year foreign direct investment in Brazil amounted to $15,014 million compared with $8733.8 million in the same period last year. At the same time Brazilians made direct investments of almost $9 billion abroad in the first eleven months of this year, a record amount, compared to a withdrawal of direct investment of $210.5 million in the same period last year. Foreigners sold off $4196.2 million of their portfolio investments in the first eleven months of this year after having purchased $4707.1 million in the same period of 2003. Brazilians bought $791.8 million of foreign stocks and bonds, in contrast to the sale of $190.6 million in 2003.