Brazil’s external balance with largest deficit in 8 years in September, but foreign direct investment saves the day

Brazil’s foreign accounts showed a deficit of US$5.7 billion in September, the largest negative balance in that month in 8 years.

The Central Bank (BC) released the latest transaction data on Monday (Oct. 24).

The deficit increased by 195% compared to the same month last year, when the balance was US$1.9 billion.

Current transactions in the foreign sector comprise the trade balance, services purchased by Brazilians abroad, and receipts, such as interest remittances, profits, and dividends from Brazil to other countries.

The trade balance showed a surplus of US$2.4 billion, but US$195 million less than in the same month a year earlier.

The services balance showed a deficit of US$1.9 billion, higher than the negative balance in September 2021, and primary and secondary income showed a deficit of US$6.1 billion, an increase of US$3 billion compared to the same month last year.

The foreign trade balance showed a deficit of US$46.2 billion in the 12 months accumulated through September, equivalent to 2.56% of GDP (gross domestic product).

In August, it stood at US$42.4 billion.

DIRECT INVESTMENT IN BRAZIL

Despite the deficit in Brazil’s external balance, the country’s foreign direct investment (FDI) was higher than the balance of current transactions, at US$9.2 billion.

Resource inflows numerically offset the negative balance of the external sector.

Inflows in September were the highest in five years.

The Central Bank recorded US$3.4 billion in capital inflows and US$5.7 billion in intercompany transactions.

Over the past 12 months, direct investment in the country totaled US$73.8 billion, equivalent to 4.1% of GDP.

In August, the figure was US$69.2 billion.

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