* Record $8.4 billion Dec deficit seen barely shrinking in
* Foreign direct investment at $5.4 billion and falling
* FDI of $65.27 billion in 2012 covered current account
By Tiago Pariz and Alonso Soto
BRASILIA, Jan 23 Brazil's current account
deficit widened to the biggest on record in December and will
barely shrink in January, according to the central bank, as weak
demand for raw material exports erodes its traditional trade
The current account deficit jumped to $8.413
billion in December, the biggest monthly shortfall since at
least 1980, central bank data showed on Wednesday, exceeding all
estimates in a Reuters poll forecasting a $6.5 billion deficit.
Accelerating imports and more corporate profits sent
overseas will also contribute to an estimated $8.3 billion
current account gap in January, Tulio Maciel, the bank's head of
economic research told reporters.
An increasingly unequal balance of payments also raises the
question of whether Brazil can continue to cover the shortfall
with foreign direct investment, whose growth has stagnated since
a jump in late 2010.
Foreign direct investment more than covered Brazil's current
account deficit in 2012, but has come up short in recent months.
FDI in Brazil totaled $5.358 billion in December and
will likely slip to $4.5 billion in January, Maciel said.
The last time foreign direct investment failed to cover
Brazil's annual current account deficit was in 2001, amid
difficult structural reforms and widespread energy rationing.
Still, Brazil has more than $378 billion in international
reserves, which could be used to finance its balance of
Brazil attracted $65.272 billion in foreign direct
investment in 2012, down slightly from $66.6 billion in 2011 but
enough to cover a current account deficit of
$54.246 billion last year.
Foreign investment has remained steady in Brazil despite a
sharp economic slowdown since mid-2011, as investors see more
opportunities in the South American giant than in a
recession-hit Europe or a slowly recovering United States.
Brazil's President Dilma Rousseff has also announced a
series of measures to lure tens of billions of dollars in
private investment to refurbish decaying airports, ports, roads
As the host of the 2014 World Cup soccer tournament, the
2016 Olympics and holder of some of the world's largest oil
reserves, Brazil is expected to keep attracting foreign capital
in coming years.
However, a weak recovery and growing state intervention in
sectors from the auto industry to electric utilities could erode
investors' confidence in the world's No. 6 economy, some
The anemic global economy is also hurting activity in Brazil
and pinching demand for exports.
Brazil, a major producer of soy and iron ore, posted its
smallest annual trade surplus in a decade last year, falling 35
percent to $19.44 billion from the year before.
In the first three weeks of this year, the country had a
trade deficit of $2.7 billion, leading some analysts to predict
the worst January print on record.
A deteriorating trade balance is driving growth of the
current account deficit, part of the balance of payments that
measures a country's foreign transactions.
Brazil's current account deficit in November was $6.265
billion, the central bank said last month.