World Economy

Brazil FDI Grows

Brazil FDI Grows
Brazil FDI Grows

Brazil’s current account deficit grew wider than expected in September but was easily covered by foreign investments, central bank data showed on Friday.

Brazil posted a current account deficit of $3.07 billion in September, larger than a gap of $2.48 billion in August and the $2.3 billion deficit forecast by economists for the month, the data showed, Reuters reported.

Brazil attracted $6.03 billion in foreign direct investments last month, up from $5.24 billion in August, the central bank said.

Despite the monthly increase, the current account deficit declined as a percentage of Brazil’s gross domestic product in the 12 months through September. It was equivalent to 4.18% of GDP, down from 4.34% in the previous month.

A weaker Brazilian real is helping exporters and curbing imports, boosting the country’s trade balance after the country recorded its first deficit in 14 years in 2014.

Brazil’s currency dropped more than 30% this year to a record low of more than 4 per dollar as investors fret over a steep rise of the country’s debt.

  Stock Market

It was as recently as August that analysts were making doomsday predictions about Brazil’s economy, pointing to recent consecutive quarters of contractions, soaring unemployment and a plunging currency. So it was a surprise, at least to some, when it turned out that in the first 20 days of October foreign investors had spent $4.2 billion in the country’s stock market, as Bloomberg reported Friday, even as some have predicted that lower prices offered in Brazil’s lagging economy were precisely what could lure investors.

“Anyone buying a selective portfolio at current levels will make money,” Guilherme Ache, a partner at Squadra Investimentos, an investment firm based in Rio de Janeiro, told Bloomberg, even as he warned that investors would need to be savvy in selections. “There’s no bell that rings when you reach a turning point in a bear market,” he added.

Just five years ago, Brazil had been one of the darlings of the developing world, an emerging economy extolled for the rapid growth of its middle class and robust employment rates. But in 2013, hints began to emerge that Petrobras, Brazil’s state oil company, was struggling, as it reported mounting losses and debt.

In 2014, reports that corrupt practices might have been taking place began to emerge. By January, the country and Petrobras were embroiled in a full-fledged scandal–Petrobras admitted to losing $2 billion in bribes–that implicated Brazilian President Dilma Rousseff.

By August, Brazil’s economy had posted two successive quarters of contraction. A recession was officially under way, not only fueled by the political crisis but also suffering from fallout from China’s recent economic downturn and the dropping prices of commodities that are vital to Brazil’s economy, including oil, sugar and coffee. The economy appeared headed into its longest recession in some 80 years.