Brazil Posts Record Current Account Deficit in December

Brazil’s current account deficit widened to a record in December, as exports fell more than imports in the world’s second-biggest emerging market.

The deficit in the current account, the broadest measure of trade in goods and services, expanded in December to $8.4 billion from $6.0 billion a year earlier, the central bank said in a report distributed today in Brasilia. The gap was larger than predicted by any of 19 analysts surveyed by Bloomberg, whose widest forecast was for a gap of $7.7 billion, and whose median estimate was a deficit of $6.3 billion.

Foreign direct investment in December rose to $5.4 billion from $4.6 billion in November, the central bank said. Economists forecast investments of $4.1 billion, according to the median estimate of 16 analysts surveyed by Bloomberg. Foreign investment totaled $65.3 billion for the year.

President Dilma Rousseff in December called on companies to increase investments after the government in 2012 cut taxes on industry and consumer goods, lowered the benchmark interest rate to a record and announced plans to revamp infrastructure. Foreign direct investment has remained near record highs, as international investors bet that Brazil will rebound after posting the slowest growth among major emerging markets last year.

Growth Forecast

The central bank on Dec. 20 cut its 2012 growth forecast to 1 percent. Brazil’s economy will grow 3 percent to 4 percent this year, Finance Minister Guido Mantega said on Dec. 27.

Brazil’s trade surplus in December fell 40.8 percent from a year earlier to $2.2 billion, according to the central bank. Exports fell 10.8 percent to $19.7 billion from a year earlier, while imports fell 4.5 percent to $17.5 billion.

Allianz SE (ALV), Europe’s largest insurer, announced Brazil investment plans this month. Allianz Global Corporate & Specialty, the unit of Munich-based Allianz that underwrites marine, aviation and corporate risks, said in Jan. 15 it had opened offices in Rio de Janeiro and Sao Paulo upon winning a license from local regulators.

Recent economic indicators show that Brazil’s economic recovery remains uneven. Industrial production in November fell for the second time in three months on lower capital goods purchases. While retail sales grew in November for the sixth straight month, the pace of growth slowed for the first time since August.

Inflation in the world’s sixth largest economy has remained above the midpoint of the central bank’s 4.5 percent target for three years. Consumer prices in the month through mid-January rose by 0.88 percent, more than forecast by any of 38 economists surveyed by Bloomberg, and annual inflation accelerated to 6.02 percent from 5.78 percent in mid-December.

Swap rates on the contract maturing in January 2015, the most traded in Sao Paulo today, rose two basis points, or 0.02 percentage point, to 7.90 percent at 10:40 a.m. local time. The real strengthened 0.2 percent to 2.0385 per U.S. dollar.

To contact the reporters on this story: Matthew Malinowski in Brasilia at mmalinowski@bloomberg.net; Raymond Colitt in Brasilia at rcolitt@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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