Brazil posts current gap, worst result in three years

Brazil posted its worst monthly current account balance in three years on Thursday as booming imports shrank the trade surplus and pushed the current account into a deficit.
The current account - the widest measure of a country's trade in goods and services - fell to a deficit of $717 million in July from a surplus of $3.05 billion a year ago and a surplus of $696 million in June, the central bank said.
The result was the worst monthly balance of payments since April 2004, when the current account deficit reached $757 million. It was also weaker than the median forecast of 16 economists predicting a surplus of $100 million.
The current account was pushed into negative territory by a surge in imports that gnawed away at the trade surplus, the central bank said. Imports have been rising at a faster pace than exports of late, helped by a strong local currency.
An increase in remittances by multinational companies to their headquarters overseas and a large interest payment on foreign government bonds also hurt the balance of payments, the central bank said. Economists shrugged off the result as a seasonal slump.
"This doesn't indicate a change in trend," said Fabio Knijnik, a financial analyst at BES Investimento. The central bank said Brazil was on track to erase the current account deficit in August but was unlikely to post a surplus for the month.
In the 12 months through July, Brazil posted a current account surplus equal to 0.99 percent of gross domestic product compared with 1.33 percent through June. The current account balance tracks a country's net flow of external transactions, including foreign trade, interest payments and services such as tourism. It is used to gauge a country's dependence on foreign capital.
Foreign investment, which falls under the capital account of the balance of payments, has surged as falling interest rates and accelerating economic growth prompt companies to invest in plants and machinery to produce more goods.
Foreign direct investment in Brazil, Latin America's largest economy, jumped to $3.58 billion in July from $1.59 billion in the same month a year ago. In June FDI had surged to a monthly record of $10.32 billion.
The central bank forecast FDI would fall slightly in August to $2 billion. The trade surplus narrowed in July to $3.347 billion from $3.815 billion the previous month. Imports surged 35 percent from a year ago to $10.77 billion. Overseas remittances by foreign companies jumped to $2.1 billion last month from $864 million in the year-earlier period. The government also paid $979 million in interest on overseas bonds that came due.