Brazil June current acct gap narrows on trade surplus

Brazil’s current account deficit narrowed sharply in June from a year earlier thanks to a surge in the country’s trade surplus in the month, central bank data showed on Monday.

The current account deficit BRCURA=ECI narrowed to $535 million from $2.78 billion in June 2008. Brazil’s trade surplus jumped to $4.62 billion in June from $2.73 billion a year earlier, accounting for most of the improvement in the current account.
Still, the result missed the median forecast of 17 economists surveyed by Reuters who predicted a $600 million surplus in the month. Estimates ranged from a deficit of $150 million to a surplus of $1 billion.

The wider-than-expected June deficit was partly due to $3.03 billion in profit and dividend remittances overseas that surpassed the central bank’s and analysts forecasts, said Altamir Lopes, the head of the central bank’s economics research department.

“The remittances had been softening, but that month we had an increase at the margin,” Lopes said at a news conference.

The current account deficit should widen to $800 million in July, Lopes said. Latin America’s largest economy posted a $1.74 billion deficit in May 2009.

In the 12 months through June, the deficit was equal to 1.37 percent of gross domestic product, compared with a deficit of 1.5 percent of GDP in the 12 months through May.

FOREIGN INVESTMENT, STOCKS
Foreign direct investment fell sharply to $1.45 billion in June from $2.73 billion a year earlier and was slightly lower than the $1.6 billion forecast in the Reuters survey.

Foreign direct investment was also lower from the previous month, when it hit an all-time high for the month of May at $2.48 billion.

Lopes said foreign direct investment should reach $1.6 billion in July.

Data on foreign portfolio investments showed inflows of $5.45 billion in July, mostly due to the initial public offering of credit card operator VisaNet (VNET3.SA) that brought $2.4 billion into the country. Fixed-income investments by overseas investors totaled $1.11 billion so far in July, Lopes added.

These investment flows should remain very volatile,” he said.