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.

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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.