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External Deficit Grows Above Direct Investment, Currency Outflows Intensify in 2025, and International Reserves Remain Brazil’s Main Cushion for Liquidity.
The Central Bank announced on Tuesday (26) the results of the external accounts for July and the partials for August.
In the 12 months up to July, the current account deficit reached US$ 75.3 billion, equivalent to 3.5% of GDP, exceeding the inflows of Direct Investment in the Country (DIC), which totaled US$ 68.2 billion during the same period, or 3.17% of GDP.
According to the partial data on contracted exchange, August recorded a net outflow of US$ 1.833 billion as of the 22nd, bringing the cumulative total for 2025 to –US$ 16.674 billion.
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In July, Brazil recorded a current account deficit of US$ 7.1 billion, worse than the –US$ 5.2 billion seen a year earlier.
In the year-over-year comparison, the reduction in the trade surplus and the increase in primary income deficit weighed, while services and secondary income showed stability.
Over the 12-month period, the negative balance of US$ 75.3 billion (3.50% of GDP) was above US$ 73.3 billion (3.43% of GDP) measured in June and well above the US$ 30.7 billion (1.37% of GDP) observed in July 2024.
Current Transactions: Trade in the Black, but Services and Income Pressures
The goods trade balance remained in surplus in July, with US$ 6.5 billion.
Exports totaled US$ 32.6 billion, up 4.8% from July 2024, while imports reached US$ 26.1 billion, an increase of 8.3%.
Although positive, the trade balance was US$ 514 million lower than a year prior.
The services account showed a deficit of US$ 5.0 billion, a level similar to July 2024.
Within this group, net expenses for international travel grew 34.1%, totaling US$ 1.6 billion.
Expenses for telecommunications, computing, and information rose 52.7%, reaching US$ 791 million.
Intellectual property advanced 26.2%, totaling US$ 842 million.
Equipment rental increased 7.0%, reaching US$ 1.0 billion.
Conversely, there was a 17% decline in transportation, which recorded US$ 1.1 billion in net expenses.
Primary Income: Profits and Dividends Rise, Interest Rates Drop
The primary income account recorded a deficit of US$ 8.9 billion in July, up 18.1% from US$ 7.5 billion in the same month of 2024.
Net interest expenses were US$ 4.2 billion, slightly below the US$ 4.4 billion observed a year earlier.
Meanwhile, net expenses for profits and dividends, associated with direct and portfolio investments, reached US$ 4.7 billion, up from US$ 3.2 billion in July of last year.
This movement reflected, among other factors, the reduction in revenues from US$ 2.6 billion to US$ 1.5 billion in the period.
Direct Investment in the Country Below the External Deficit
Direct Investments in the Country totaled US$ 8.3 billion in July, above US$ 7.2 billion in July 2024.
Over the 12-month period, DIC totaled US$ 68.2 billion (3.17% of GDP), after US$ 67.0 billion (3.14% of GDP) in June and US$ 65.2 billion (2.90% of GDP) in July 2024.
In July, most of the inflows came from equity participation (US$ 6.8 billion), divided between US$ 3.2 billion in new investments (excluding reinvested profits) and US$ 3.6 billion in reinvested profits.
Intercompany operations amounted to US$ 1.5 billion. With the current account deficit exceeding DIC, the difference is covered by other forms of external financing.
Portfolio investments in the domestic market had a net outflow of US$ 192 million in July, resulting from the withdrawal of US$ 1.1 billion in stocks and investment funds and an inflow of US$ 908 million in debt securities.
In the 12 months up to July, portfolio investments accumulated a net inflow of US$ 3.1 billion.
Contracted Exchange: August in the Negative and Banks Sold
The partial data for the contracted exchange in August, as of the 22nd, indicates a net outflow of US$ 1.833 billion.
The movement concentrated in the financial segment (–US$ 1.814 billion), while the commercial sector recorded a slight deficit of US$ 19 million.
In the same period, the banks reported a net short position of US$ 27.812 billion in the spot market.
So far this year, as of August 22, the balance of the contracted exchange is negative by US$ 16.674 billion.
According to the Central Bank, the contracted exchange indicator reflects the contracts in the spot market and is not affected by settlements, serving as a preliminary reading of the currency flow.
International Reserves: High Stock and Slight Increase in July
Brazilian international reserves totaled US$ 345.1 billion in July, an increase of US$ 671 million compared to the previous month.
A factor contributing to the increase was the net return of US$ 2.1 billion from repo operations.
Variations due to exchange rate parity resulted in a reduction of US$ 1.8 billion, and price variations reduced the stock by US$ 476 million. Interest income reached US$ 731 million for the month.
Balance of Payments Concepts
Current transactions include the balance of the goods trade, the services account, income (primary and secondary), and current transfers.
The Direct Investment in the Country (DIC) corresponds to long-term foreign capital directed towards production and corporate control, including equity participation, reinvested profits, and intercompany operations.
The contracted currency flow is the sum of the recorded inflows and outflows by agents in the spot market and, being preliminary, is subject to variations as new contracts are reported.
With the external deficit surpassing DIC over 12 months and August recording net outflows in the contracted exchange, which indicator do you consider more crucial to closely monitor in the coming months?
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