The Growing Current Account Deficit

BRAZIL ECONOMICS - Report 27 Oct 2014 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

The current transactions deficit continues to increase. In September it again exceeded the consensus projections, rising to US$ 83.6 billion over the past 12 months, or 3.7% of GDP. This is the highest 12-month deficit since March 2002. The quality of its financing has also been worsening. Since the first quarter of 2013, foreign direct investment has been lower than the current account deficit, whose financing has thus depended on more volatile inflows to the debt and equity markets, in for former case largely prompted by the prospects of carry-trade gains derived from the difference between the internal and external interest rates.

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