MercoPress. South Atlantic News Agency

Slower Brazilian economy cuts current account deficit by half

Brazil’s current account deficit dropped by half in the first quarter compared to a year ago as businesses cut imports and sent less money to parent companies abroad amid slower economic growth. According to the latest release from the Central Bank the deficit narrowed to 5 billion US dollars in the first quarter of the year compared to 10.3 billion in the same period in 2008.

The current account deficit is defined as the broadest measure of trade in goods and services.

Brazil’s deepest economic contraction on record during the last quarter of 2008 has led to a drop in imports as domestic demand falls, and the slower economic growth reduced repatriation of profits by trans-national corporations.

“The risk of current account imbalances dropped in Brazil, given slower economic growth is narrowing the deficit,” said Roberto Padovani, chief economist at Banco WestLB in Sao Paulo.

The Brazilian Central Bank expects the annual current account deficit to narrow to 16 billion in 2009 from 28.2 billion in 2008, the widest in more than nine years. Companies’ profit and dividend remittances to their home countries dropped to 3.6 billion in the first quarter of 2009 from 8.66 billion a year earlier, the central bank said. Imports fell to 28.2 billion from 35.9 billion US dollars in the same period.

The current account deficit widened to 1.65 billion in March from a revised 611 million US dollars in February. The bank expects the deficit to narrow to 1.3 billion in April. Foreign direct investment in Brazil also fell to 1.44 billion in March from 1.97 billion in February.