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Brazil Posts Record Current Account Deficit in January

Brazil’s current account deficit expanded to a record in January, as exports fell and imports rose in the world’s second-biggest emerging market.

The deficit in the current account, the broadest measure of trade in goods and services, widened in January to $11.4 billion from $7 billion a year earlier, the central bank said in a report distributed today in Brasilia. The gap was bigger than estimated by all but two of 22 analysts surveyed by Bloomberg, whose median estimate was for a deficit of $9.65 billion.

Foreign direct investment in January fell to $3.7 billion from $5.4 billion in December, the central bank said. Economists forecast investments of $4.85 billion, according to the median estimate of 18 analysts surveyed by Bloomberg.

President Dilma Rousseff’s government has sought to encourage investment to help spur Brazil’s economy, which expanded the slowest among major emerging markets last year. In the last month, officials have removed IOF taxes from foreign investment in certain real estate funds and reiterated invitations for international companies to participate in local infrastructure tenders. After exceeding government forecasts last year, foreign direct investment is expected to hover around record levels in 2013.

Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, rose 10 basis points, or 0.10 percentage point, to 7.77 percent at 10:44 a.m. local time. The real strengthened 0.3 percent to 1.666 per U.S. dollar.

Slower Growth

The central bank estimates Brazil’s gross domestic product expanded 1 percent last year, after growing by 2.7 percent in 2011 and 7.5 percent in 2010. The economy will expand 3 percent to 4 percent this year, according to Finance Minister Guido Mantega.

Brazil’s trade deficit in January was $4 billion, compared with a gap of $1.3 billion a year ago, according to the central bank. Exports fell 1 percent to $16 billion from a year earlier, while imports rose 14.6 percent to $20 billion.

This week, Chilean retailer Cencosud said it would invest $116 million to open 15 supermarkets in Brazil this year as part of its South American expansion plans.

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

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

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