April 24, 2020 / 3:00 PM / a month ago

UPDATE 1-Brazil posts record $22.2 bln portfolio outflow in March as impact of virus is felt

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By Jamie McGeever

BRASILIA, April 24 (Reuters) - Brazil posted a record portfolio outflow of $22.2 billion in March, official figures on Friday showed, as the coronavirus crisis, oil price collapse and rising domestic political uncertainty prompted investors to flee local markets.

The total comprised a $7.6 billion outflow from equity funds and a $14.6 billion outflow from debt securities, and increased the overall outflow for the first quarter of the year to $24.1 billion, the central bank said.

The spike in volatility across Brazilian financial markets last month, which triggered historic declines in asset prices and widening of spreads, has come back with a vengeance in recent days, pointing to another monthly outflow in April.

“This is a warning signal for the authorities to strengthen the macro framework and move forward with key reforms still trapped in Congress,” said Alberto Ramos, head of Latin American research at Goldman Sachs in New York.

The benchmark Bovespa stock index fell 30% in the month, its biggest monthly fall since 1998, and the real currency depreciated 14% against the dollar, its steepest fall since 2011.

The $24.1 billion total outflow in the first quarter was in stark contrast to the $10.5 billion inflow in the same period last year.

Brazil registered a current account surplus of $868 million in March, its first monthly surplus in almost three years, with the central bank predicting an even wider surplus of $2 billion in April.

As a share of gross domestic product in the 12 months to March, the current account deficit narrowed to 2.8% from 2.9% the month before, the central bank said.

Foreign direct investment into the country rose to $7.62 billion in March, bringing total FDI in the first quarter up to $19.2 billion, slightly higher than $18.3 billion in the same period a year ago.

But the central bank said it expects that inflow to slow to just $1.5 billion in April. (Reporting by Jamie McGeever; Editing by Kevin Liffey and Steve Orlofsky)

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