External Sector

BRAZIL ECONOMICS - Report 27 Nov 2017 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

After a sequence of 10 years running current account deficits, small surpluses have started to appear (based on seasonally adjusted monthly numbers). The most intense movement is in the trade balance, whose strong surpluses are a consequence of the decrease of imports provoked by the extremely low level of gross fixed capital formation. In this sense, the tendency toward surplus in the current accounts (or high trade surpluses) is much more a symptom of a disease – the recession followed by weak growth – than a bill of good health of the Brazilian economy. As the economy slowly recovers, investments and imports will gradually rise, leading to gradual shrinkage of trade surpluses and gradual expansion of current account deficits.

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