Brazil's Large Exports Yield Record Current Account Surplus in July

A surge in merchandise exports pushed Brazil's current account to a record surplus in July, $3043 million, as reported late August 17 by the Central Bank of Brazil. With seasonal adjustment by Haver Analytics, the balance is $2203 million, as seen in the table below, the second largest monthly amount after $2715 million in November.

Brazil sells oil, coffee and copper, among numerous other items. Obviously, two of these items have seen major price increases that have raised the value of Brazil's exports. They are up more than 23% from a year ago. This good gain, $2.6 billion, has more than offset a larger percentage increase in imports, nearly 32% on the year, or $1.9 billion.

Frequently, economists and other analysts assess a nation's trade and current account conditions over against the capital and financial accounts. But for Brazil, the more relevant comparison involves the trade balance versus the service and income flows. It is the large trade surplus that "finances" a modest deficit in services and a more significant deficit in income. Brazil has a sizable negative international investment position, -$340 billion at the end of last year, and it sends out considerable amounts of profits, dividends and interest payments. As noted below, the deficit on income exceeds $2.1 billion in most months.

Flows on the financial side are very erratic, but generally direct investment remains positive. So there are consistent flows of foreign equity funds into Brazil, suggesting that companies want increasingly to be represented in that sizable market. Portfolio and "other" investments swing widely from month to month, making it hard to characterize other investors' attitudes toward the country.