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UPDATE 2-Brazil recovery widens current account gap in Oct-cenbank

by on November 22, 2012 6:51 pm GMT
 

Thu Nov 22, 2012 1:51pm EST

* Brazil posts larger-than-expected $5.4 bln c/a deficit

* Economic recovery boosts imports and profit remittances

* Foreign direct investment marks new record for October

BRASILIA, Nov 22 (Reuters) – Brazil’s current account
deficit widened more than expected in October as a recovering
economy bolstered imports and profit remittances, the central
bank said on Thursday.

Brazil had a current account deficit of $5.431
billion last month, larger than the median forecast of $4.8
billion in a Reuters poll of 17 economists.

Brazil’s current account deficit, a broad measure of a
country’s foreign transactions including trade in goods and
services but also profit remittances and interest payments, had
totaled $3.157 billion in October last year. The deficit in
September was $2.6 billion, the central bank said last month.

The bank’s deputy research chief, Fernando Rocha, said a
pickup in profit remittances by foreign companies operating in
Brazil as well as more spending by Brazilians traveling abroad
should widen the deficit to about $6 billion in November.

Brazil’s trade surplus narrowed more than expected to $1.662
billion in October due to a jump in imports, below expectations
for a $2 billion surplus and also down from a trade surplus of
$2.359 billion in the same month last year.

Still, a strong flow of foreign investment in Brazil despite
the weak global economy has so far helped cover the country’s
current account gap this year.

Foreign direct investment in Latin America’s largest economy
was $7.7 billion in October, up from $4.4 billion in September
and more than the expected $6 billion. It was the largest figure
for the month of October on record.

Central bank chief Alexandre Tombini earlier on Thursday
said the jump in FDI last month was an indication that the South
American giant continued to lure more productive capital than
speculative flows.

Efforts by the government of President Dilma Rousseff to
open public infrastructure concessions to private investors and
major sporting events such as the 2014 soccer World Cup are
expected to attract more investment in coming years.

Foreign participation in local portfolio investments, which
along with FDI are part of the capital account, fell to $491
million from $983 million in September, mostly due to the sale
of local shares. Brazil’s benchmark Bovespa stock index
has fallen nearly 18 percent since hitting the year’s high in
early March.

Portfolio inflows reached $397 million in October last year.