Brazil: External accounts show positive balance of $649 million in May

Brazil's external accounts registered a positive balance of $649 million dollar in May, buoyed by a remarkable trade surplus, as reported by the Central Bank in Brasília on Monday (Jun. 26). In the same month of the previous year, there was a deficit of $4.632 billion.

The year-on-year contrast is solely attributed to the $6.4 billion surge in the trade surplus for the month. Goods exports reached a record high of $33.306 billion in May, marking an 11.2 percent increase compared to the same period in 2022. On the other hand, imports amounted to $23.587 billion, indicating an 11.3 percent decline from May 2022.

As a result, the trade balance for May 2023 closed with a positive surplus of $9.719 billion, representing a significant increase compared to the positive balance of $3.368 billion recorded in May 2022. This is the largest surplus in the historical series for any given month since January 1995.

Conversely, the deficit in primary income, encompassing interest payments, corporate profits, and dividends, increased by $1.1 billion. Meanwhile, the deficit in services decreased by $290 million, and the surplus in secondary income, involving transfers without counterparts, dropped by $309 million.

Over the 12-month period ending in May, the foreign accounts deficit amounted to $48.545 billion, equivalent to 2.45 percent of the gross domestic product (GDP). In comparison, the deficit was $53.826 billion (2.73 percent of GDP) in April 2023 and $51.218 billion (2.89 percent of GDP) for the equivalent period concluding in May 2022.

The year-to-date deficit stands at $12.647 billion, compared to a negative balance of $21.099 billion from January to May 2022.

IDP

Regarding the financing of a negative current account balance, countries often resort to investments or loans from abroad. The so-called Direct Investment in the Country (IDP) is considered the preferable approach as it involves resource allocation in the productive sector and typically entails long-term investments.

In May, net inflows of direct investments in the country totaled $5.380 billion, reflecting a 36 percent growth compared to May 2022, which witnessed inflows of $3.969 billion.

Over the 12-month period ending in May, IDP exhibited substantial growth in a year-on-year comparison, totaling $83.369 billion, equivalent to 4.21 percent of GDP. In the previous month, April 2023, these inflows reached $81.958 billion (4.16 percent of GDP), while in May 2022, they amounted to $56.979 billion (3.22 percent of GDP).