February 1, 2013 / 5:26 PM / 5 years ago

UPDATE 1-Brazil posts biggest trade deficit ever in January

* January $4.035 bln trade deficit worse than expected,

* Imports jump 14.6 pct from Jan/11, exports drop 1.1 pct

* Central bank data series started in 1959

By Alonso Soto

SAO PAULO, Feb 1 (Reuters) - Brazil posted its worst monthly trade deficit on record in January, trade ministry data showed on Friday, a reminder of the global headwinds that continue to face Latin America’s largest economy.

Brazil posted a trade deficit of $4.035 billion in January, the widest gap since 1959, the earliest data available for trade results on the central bank’s website.

The result came far below expectations for a $3.4 billion deficit, according to the median forecast of 17 analysts surveyed by Reuters.

A global slowdown has curbed demand and prices for key Brazilian exports like soy and iron ore, further hurting local exporters who already complain that an over-valued currency and sky-high production costs make them less competitive than foreign rivals.

Exports in January fell 1.1 percent versus 2012 while imports rose 14.6 from the previous year.

Even though exports make up only about 10 percent of Brazil’s $2.5 trillion economy, it is considered a key sector by President Dilma Rousseff’s government.

Rousseff has offered billions of dollars in subsidized lending to help exporters, mostly those who produce manufactured goods. She has also raised trade barriers on dozens of imported products to protect local industry.

Brazil is also backing one of its own, ambassador Roberto Azevedo, to head the World Trade Organization in a bid to increase its clout in the struggling trade club.

Dwindling profits for exporters could hit business confidence at a time when the Brazilian economy is struggling to recover after two years of below-trend growth.

In a sign that the recovery remain fragile, industrial output failed to grow in December from November with a sharp drop in capital goods production suggesting lackluster levels of investment ahead.

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