Brazil’s Current Account Deficit in 2024

BRASILIA (Reuters) – Brazil closed 2024 with a current account deficit equivalent to 2.55% of gross domestic product (GDP), the central bank said on Friday. This represents more than double the level seen in the previous year, following a reported shortfall in December.

Deterioration Factors

The decline was primarily attributed to a shrinking trade surplus, with import growth contrasting against decreased exports. This occurred amid a stronger-than-expected performance for Latin America’s largest economy, which consistently exceeded expectations throughout the year.

The central bank noted that Brazil’s trade surplus fell by 28.2% to $66.2 billion, reflecting a 1.2% decline in exports and an 8.8% rise in imports.

Services Account and Factor Payments

Additionally, the services account deficit grew by 24.7% over the year, reaching $49.7 billion, further contributing to the current account’s deterioration. Conversely, the factor payments deficit narrowed by 5.1% due to reduced profit and dividend outflows, according to the central bank.

Monthly and Yearly Summary

The current account deficit in December amounted to $9 billion, while foreign direct investment (FDI) for that month totaled $2.8 billion. For the year, FDI reached $71.1 billion, equivalent to 3.24% of GDP, marking a 13.8% increase from the previous year.

Portfolio Investments

Furthermore, the central bank reported that portfolio investments in the domestic market posted net outflows of $4.3 billion in 2024. This was driven by net outflows of $17.1 billion in equities and investment funds, although it was partially offset by net inflows of $12.8 billion in debt securities.

In December alone, net outflows from portfolio investments reached $12.6 billion amid a sharp rise in the risk premium on Brazilian assets. This spike followed the government unveiling a fiscal package that disappointed investors worried about the rising trajectory of public debt. This incident marked the second-worst monthly result in the central bank’s series, dating back to 1995, only surpassed by the $22.1 billion outflow in March 2020 during the onset of the COVID-19 pandemic.