Brazil Has Worst Trade Gap Since at Least 1991 on Export Plunge

Brazil in January recorded its largest monthly trade deficit on record as exports dropped and imports of consumer and capital goods increased.

Brazil posted a trade deficit of $4.06 billion after posting last year the worst annual trade balance since at least 1991, the Trade Ministry said in a report published today. Imports rose 5.4 percent on a daily average from December, totaling $20 billion, while exports fell 27 percent to $16 billion on a decline in foreign sales of cars and ethanol.

While trade partners including China and Argentina have seen their economies slow, record-low unemployment and higher public spending have fueled domestic demand and fanned inflation in Brazil. Policy makers have raised the benchmark interest rate in seven straight meetings to slow consumer price increases as a falling real makes some imports more expensive.

Swap rates on contracts due in January 2015, the most traded in Sao Paulo today, rose four basis points, or 0.04 percentage point, to 11.73 percent at 5:13 p.m. local time. The real weakened 1 percent to 2.4362 per U.S. dollar and is down 18 percent in the past year.

The median estimate of 19 analysts polled by Bloomberg was for a $4.5 billion trade deficit in January. Exports of manufactured items fell 2.6 percent while imports of consumer and capital goods increased 8.8 percent and 7.1 percent, respectively, according to today’s report.

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