FOCUS-Brazil current account reflects weak exports
Reuters, Monday, May 17, 1999 at 14:09
By Joelle Diderich
BRASILIA, May 17 (Reuters) - Brazil's current account
deficit widened slightly in April as exports remained weak
despite a sharp currency devaluation in January, the Central
Bank said Monday.
The current account gap widened to $33.97 billion,
equivalent to 4.78 percent of gross domestic product (GDP), in
the 12 months to April from a revised 4.75 percent of GDP in
the year to March, the bank said in a statement.
The current account includes imports and exports of
merchandise and payments and receipts for services such as
shipping, banking and tourism.
Brazil's current account deficit was one of the reasons for
the mass investor exodus early this year that forced the
Central Bank to allow the domestic currency, the real, to float
against the dollar in mid-January.
The domestic currency has lost around a third of its value
against the dollar, making Brazilian products cheaper in dollar
terms.
But the local economy has proven to be more resilient than
initially forecast, giving manufacturers little motivation to
shift their sales focus to foreign markets.
Brazil's GDP in the first quarter actually grew 1 percent
from the fourth quarter after two straight quarters of
contraction, according to figures released last week.
"What it shows is that exports have still not reacted,
despite the devaluation of the real, and what will make the
(current account) deficit improve is the trade balance," said
Dany Rappaport, chief economist at Banco Santander in Brazil.
He said exports were also weak because international
commodities prices remained low and economic activity was
declining across Latin America, which buys most of Brazil's
manufactured goods.
Brazil, the biggest economy in the region, is a major
producer and exporter of coffee, soybeans and sugar.
Helped by strong sales of agricultural products, the
country posted a modest trade surplus of $30 million in April,
compared with a trade deficit of $217 million in March.
But government officials now admit Brazil is unlikely to
meet a forecast, included in an agreement with the
International Monetary Fund, of a trade surplus of $10.8
billion in 1999.
Instead, it was likely to show a trade surplus of $6
billion to $7 billion, compared to a trade deficit of $6.4
billion the previous year, Central Bank President Arminio Fraga
said earlier this month.
Economists were being even more cautious, forecasting a
trade surplus of $3 billion to $5 billion this year. They
predict the current account gap will shrink to 3.04 percent of
GDP by the end of 1999, according to a Reuters poll.
joelle.diderich@reuters.com))
Copyright 1999, Reuters News Service
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