Macroeconomic Forecast Brazil

August 2006 | Macroeconomic Forecasts

The current account was in surplus to the tune of US$614mn in June, the highest figure in three months. However, the accumulated surplus for 2006 was US$3.087bn, down 41.3% y-o-y. While we had expected the current account surplus to shrink to US$9.0bn in 2006 and US3.0bn in 2007, from US$14.28bn in 2005, the results exhibited thus far expose our forecast to downside risk. While the appreciation of the real is a major factor in this deterioration, it is not because of the stronger currency's effect on trade (the trade balance was virtually unchanged). Rather, it has to do with the repatriation of profits by multinational corporations, who are seeking to move back into dollars and euros while the real is strong. According to data from the Banco Central do Brasil (BCB), foreign firms repatriated a net US$8.9bn in H106, compared with only US$6.1bn in the same time frame last year.

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