Stênio Ribeiro
Reporter - Agência Brasil

Brasília - The country's current account - which reflects its external commercial and financial transactions - showed a US$ 452 million deficit in January. This is the first time since December, 2004, that the result has been negative for this account, according to a report issued by the Central Bank.

The deficit was caused by an increase in profit and dividend remittances abroad, in consequence of the depreciation of the US dollar in relation to the real, according to Altamir Lopes, head of the Central Bank's Economic Department. Lopes explained that the appreciation of the real contributes to an increase in the flow of dollars in circulation and affects the profitability of multinational corporations, which take their profits and send them abroad.

Lopes pointed out that the negative result occurred despite a trade surplus of US$ 2.844 billion and a US$ 308 million surplus in the unilateral transfers account. The deficit side of the ledger, however, was even greater, with service expenditures and income remittances totaling US$ 3.605 billion.

Despite January's deficit, the current account registers a cumulative surplus of US$ 12.9 billion over the past 12 months. This amount is equivalent to 1.62% of the Gross Domestic Product (GDP), the sum of wealth produced in the country.

The Central Bank report shows a US$ 419 million deficit in the service account. Foreign transportation expenses amounted to US$ 132 million, equipment rental cost US$ 355 million, computer and information expenses came to US$ 153 million, and royalty and licensing fees cost US$ 103 million.

According to Lopes, foreign direct investments in the productive sector totaled US$ 1.503 billion in January, and "the inflows are quite positive" this month, as well, amounting to US$ 770 million as of yesterday (22). The Central Bank forecasts that these investments will reach US$ 1 billion in February.

Foreign direct investments in January increased 23.4% in comparison with January, 2005. Still, they represent less than half the US$ 3.218 billion in income remittances abroad, which were up 133% in relation to January, 2005. Of the total amount transferred, US$ 977 million correspond to profits and dividends on direct investments, while US$ 1.2 billion represent interest payments on debt instruments.

Translation: David Silberstein