Brazil's July current account surplus more than doubled from June on a record trade surplus and the country's foreign direct investment, a gauge of overseas business confidence, also rose strongly, central bank figures showed on Thursday.
Galloping exports offset the effects of a near three-year-high for the country's currency that is encouraging foreign firms to ship profits abroad rather than keep them in South America's largest economy The current account surplus in July - the widest measure of Brazil's international transactions and reliance on foreign capital - rose to a record $2.59 billion from June's $1.2 billion surplus and was higher than a $1.8 billion surplus for July 2004.
But the bank lowered its 2005 current account surplus estimate to $4 billion from $4.8 billion as a stronger currency encouraged companies to buy dollars and send capital abroad. Brazil posted a $11.67 billion 2004 account surplus. In a sign of the trend, expatriation of profits and dividends rose to $601 million in July, 37 percent above that of a year earlier.
"Even with an increase in the deficit in the services and revenue accounts, it wasn't sufficient to offset the size of the trade balance, which was very strong," said economist Cristiano Souza at MCM Consultores.
Brazil on August 1 posted a trade surplus of $5.01 billion in July, the largest ever for any month, according to the trade ministry.
Foreign direct investment, which comes under the balance of payment's capital account, was $2.03 billion in July, up strongly from $1.3 billion in June 2005 and $1.6 billion in July 2004.
Brazil's improving trade performance, fuelled largely by a relatively cheap currency in historical terms over past decades, paved the way for current account surpluses in each of the last two years after years of destabilising current account deficits, which at times provoked balance of payments crises, with pressure on the currency to weaken.
The trade surplus has grown thanks to booming exports of farm crops and other commodities like iron ore, along with an expanding pool of buyers for manufactured products.
The amount of FDI, which includes long-term investments such as fixed assets, has grown and appears to show that foreign investors for now are brushing aside a two-month-old bribes-for-votes scandal rocking the government as they bet on medium- and long-term growth in the country.
In the first seven months of 2005, foreign direct investment rose to $10.6 billion from $5.65 billion in the year-ago period. In other positive news for the government's external accounts, the central bank said Brazil's total foreign debt had fallen to its lowest level in nearly eight years, the central bank said.
Brazil's total external debt was $198.3 billion in May, the lowest level since December 1997 when it was $191.6 billion, the bank said.
With the improving debt profile, Brazil's treasury has cut its 2005 estimate for dollar purchases to repay maturing debt to $9 billion from $9.5 billion, the central bank said. Brazil's current account surplus for the 12 months to July represented 1.94 percent of gross domestic product, up from 1.86 percent during the same period to June.