October 1, 2011 / 4:20 PM / 6 years ago

Colombia's current account deficit widens in H1

* C/a deficit is $4.46 bln in first half of year

* Amounts to 2.7 pct of gross domestic product (GDP)

BOGOTA, Oct 1 (Reuters) - Colombia’s current account deficit widened in the first half of the year to $4.46 billion, or 2.7 percent of gross domestic product, fueled by imports and capital outflows abroad by firms, central bank data showed.

Once seen as a failing state, Colombia has become a magnet for foreign investment, especially in its natural resources sectors, and has found strong demand for the now-investment-grade debt in Latin America’s No. 5 economy.

In the first half of 2010, the country posted a current account deficit in its balance of payments of $2.67 billion, or 1.9 percent of GDP.

“This widening originated principally by a rise in current outflows related to imports of goods and services and greater profits garnered by foreign-funded companies,” the bank said in a report published late on Friday.

“The rise of outflows was partially offset by greater values of exported goods and services.”

The current account balance is the widest measure of a country’s foreign transactions, encompassing trade, interest payments and services. As such, it is a gauge of a country’s reliance on foreign capital.

Contributing to the widening current account deficit were profit remittances by foreign companies operating in Colombia, which rose 33.6 percent to $6.2 billion versus a year earlier, the central bank said.

That stemmed in particular from foreign companies producing coal and oil in the country, the bank said. Colombia is the world’s No. 4 coal exporter, Latin America’s No. 4 oil producer and a top ferronickel producer.

Countering that were inflows including remittances by Colombians working abroad, who sent home $2 billion in the first half of the year, equal to 1.2 percent of GDP and a 7.6 percent increase in dollar terms from a year earlier.

Helping offset the current account deficit was net foreign direct investment (FDI), which is part of the balance of payment’s capital account.

Net FDI rose 74 percent to $6.29 billion in the first half of the year versus 2010’s first half, the bank said.

Net FDI by foreign companies into Colombia increased 91 percent to $7 billion during the first half of the year versus $3.66 billion a year earlier, it said.

The bulk of that flowed into the oil and mining sectors, it said.

Colombia has seen a boom in foreign investment over the last few years, mainly in the mining and oil sectors, as security improves due to a U.S.-backed crackdown.

Colombians net foreign direct investment abroad soared 178 percent to $1.7 billion in the first half of the year, the bank said.

Foreign portfolio investment shot up eightfold in the first half of 2011 to $3.29 billion versus $483 million in the same period last year, the authority said.

Reporting by Jack Kimball

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