January 26, 2018 / 1:52 PM / a year ago

UPDATE 1-Brazil 2017 current account deficit shrinks to 10-year low

(Adds details, context)

By Bruno Federowski

BRASILIA, Jan 26 (Reuters) - Brazil’s current account deficit shrank in 2017 to a decade low, in a boost to the nation’s recovery from the deepest recession in three decades.

The current account deficit tightened nearly 60 percent from 2016 to $9.762 billion, central bank data showed on Friday, capped by a $4.327 billion December deficit.

Economists polled by Reuters had expected a $4.050 billion deficit last month, according to the median forecast in a Reuters poll.

Policymakers have said last year’s solid performance from Brazil’s external accounts gave a major boost to economic growth.

Foreign direct investments in Brazil, however, fell 10 percent to $70.332 billion last year, their lowest since 2013, mostly due to a decline in transfers between different units of the same company.

This suggests multinational companies may be reluctant to invest in new projects in Brazil ahead of the 2018 elections, the most wide-open and unpredictable in decades.

Still, purchases of stakes in Brazilian companies by foreigners rose to a five-year high, tracking a recovery in overall merger and acquisition activity last year.

Conglomerates under pressure from corruption probes and excessive debt were forced to sell major assets last year, lifting the value of Brazilian M&A by 33 percent.

Bankers and lawyers told Reuters this month that a rebounding economy and record-low interest rates should continue to support M&A in 2018. (Reporting by Bruno Federowski; Editing by Lisa Von Ahn)

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