Brazil August Foreign Investment Biggest Inflow Since November

Brazil’s foreign direct investment last month was the largest since last November, as policy makers work to bring the economy out of recession.

Foreign direct investment in August rose to $6.8 billion from $5.9 billion the month before, the central bank said in a report distributed today in Brasilia. That compares with a median estimate of $4.4 billion from 18 economists surveyed by Bloomberg. The deficit in the current account, the broadest measure of trade in goods and services, narrowed in August to $5.5 billion from $6 billion a month earlier, in line with estimates for $5.4 billion gap.

Brazil’s trailing 12-month current account deficit has held steady near record levels while exceeding FDI inflows. The increased demand for dollars has helped weaken the real. Economists expect Latin America’s largest economy to have the slowest growth since 2009 this year as President Dilma Rousseff will vie for re-election in less than two weeks.

Swap rates on the contract due in January 2017, the most traded in Sao Paulo today, rose one basis point, or 0.01 percentage point, to 11.95 percent at 10:45 a.m. local time. The real weakened by 0.1 percent to 2.4134 per U.S. dollar.

The central bank maintained its 2014 current account deficit forecast at $80 billion and its foreign investment estimate at $63 billion. Brazil recorded an $81 billion gap and investments of $64 billion in 2013.

First Half

Brazil’s economy entered recession in the first half of this year as a 0.6 percent drop in the second quarter followed a revised 0.2 cut in the first three months. Economists in the latest central bank survey lowered their 2014 growth estimate for the 17th straight week to 0.30 percent. The government on Sept. 22 cut to 0.9 percent its estimate for this year’s gross domestic product expansion.

Annual inflation in mid-September reached 6.62 percent from 6.49 percent the month prior, the national statistics agency said on Sept. 19. Brazil targets inflation of 4.5 percent plus or minus two percentage points.

The central bank has held the Selic benchmark rate at 11 percent for the past three meetings, the highest level since 2012, after raising it by 375 basis points in nine consecutive meetings through April. Inflation will begin to converge to the target by 2016 if the current key rate level is maintained, the bank said in minutes of the Sept. 2-3 meeting.

Brazil’s real has weakened 7.3 percent in September, the worst performance among emerging markets currencies tracked by Bloomberg.

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