25-01-2012 12:24 Brazil
Brazil has record FDI last year - more than current account deficit
BRASILIA, Jan 25 (NNN-MERCOPRESS) - Brazil posted a record-high current account deficit last year on rising profit remittances by multinational companies and massive spending abroad by Brazilian tourists.
However the deficit was more than covered by another record - this time for foreign direct investment (FDI), the Central bank said.
Brazil posted a record current account deficit last year of US$52.6 billion, up from US$47.3 billion in 2010, the Central bank said. Last year's deficit was equal to 2.12% of gross domestic product.
However as in past years, the current account gap was more than covered by rising foreign direct investments (FDI) , the bank said. Foreign direct investment hit a record of US$66.7 billion last year - up from US$48.5 billion the previous year.
Armed with a strong Brazilian Real currency and backed by rising personal incomes, Brazilians spent a record of more than US$21 billion on overseas travel last year, rolling up a deficit in the country's travel accounts of US$14.5 billion. The gap in travel accounts in 2010 was US$10.5 billion.
Meanwhile, multinational companies installed in Brazil stepped up profit remittances last tyear - this time to a record of US$38.2 billion. Remittances in 2010 were US$30.4 billion.
The rise in remittances was similar to the pattern in 2008 and 2009, when profitable Brazilian subsidiaries sent money back to parent companies to cover losses posted by units elsewhere in the world.
Tulio Maciel, the central bank's statistical coordinator, said, “last year's deficit was fully financed by foreign direct investment, which presented strong inflows throughout the year in a demonstration of continued foreign investor confidence in the Brazilian economy.”
On the other hand, foreign investors were less sanguine about Brazil last year when it came to so-called portfolio investments, money placed in Brazilian stocks and bonds.
Net inflows on the portfolio side last year amounted to US$17.5 billion, a respectable figure but down sharply from US$67.8 billion in 2010.
Analysts noted that many foreign investors pulled out of Brazilian stocks and bonds last year as the government hiked taxes on different investment options during the course of the year.
Maciel added that on the overall last year current account deficit “reflects continuing economic growth and heavy Brazilian demand for goods and services from abroad, for both consumers and businesses”.
He added that Brazilian businesses, like tourists, joined in the overseas shopping spree last year, with spending abroad on equipment rentals, transport and information technology services all increasing by 10% or more last year over 2010 levels.
The trade balance was also positive with a surplus of US$29.8 billion.
Brazil's economy expanded by about 3% last year, a sharp decline from the 7.5% pace in 2010 but still faster than many of the world's biggest economies and a strong enough performance to cut the unemployment rate to record lows, Maciel pointed out.
The central bank's standing forecast for this year's current account deficit is US$65 billion, or 2.44% of GDP, based on heavy demand for imports from both consumers and businesses.
Economic growth is expected to be somewhat higher this year than last year, with the Finance Ministry forecasting GDP expansion of 4% to 5.5%, bank sources said.