CB of Brazil Expects US$30 Billion in Foreign Accounts Deficit

By Jay Forte, Contributing Reporter

RIO DE JANEIRO, BRAZIL – The Central Bank (CB) of Brazil expects a larger deficit in foreign accounts this year. The estimate, released today (March 24th), of the negative balance of current transactions, which are the purchases and sales of goods and services and income transfers from the country to the world, rose from US$28 billion to US$30 billion.

This amount will correspond to 1.45 percent of Gross Domestic Product (GDP), the sum of all goods and services produced in the country. In the first two months of this year, the deficit was US$6.020 billion.

In 2014 Brazil registered a record deficit of US$90.948 billion, well above 2013’s deficit of US$81.108 billion and the highest registered since the CB started the series in 1947. In 2014 the annual deficit is equivalent to 4.17 percent of the country’s GDP, the worst result since 2001.

Most of the negative balance forecasted this year is in the primary income account (profits and dividends, interest payments and salaries), with an estimated deficit of US$47.6 billion. The previous forecast was US$44.1 billion.

The services account (international travel, transportation, equipment rental, insurance, among others) is expected to present a negative result of US$36.7 billion, against US$31.2 billion previously forecast.

The trade balance (exports and imports of products) should contribute to reducing the deficit in current transactions. The estimate for the year is a surplus of US$51 billion. The previous forecast was US$44 billion.

Balance of payments data also include foreign investment. From January to February, direct investment in the country (IDP), resources that enter and go to the productive sector of the economy, reached US$16.834 billion. The forecast for the year was kept at US$75 billion.

The CB also released data showing the expenses of Brazilians traveling abroad totaled US$1.360 billion in February this year, a result 61.7 percent higher than in the same period of last year, when Brazilians disbursed US$841 million.

In the first two months of the year, expenses totaled US$2.939 billion, 74.8 percent higher than the first two months of 2016 (US$1.681 billion).

Foreign travel income in Brazil was US$535 million in February and US$1.196 billion in the two months of the year, compared to US$599 million and US$1.249 billion, respectively, in the same period of 2016.

With these results of Brazilian expenses abroad and revenues of foreigners in Brazil, the international travel account was negative at US$824 million last month and at US$1.743 billion in the first two months.

The Central Bank’s projection for the negative travel account balance this year rose from US$10.5 billion to US$12.5 billion.