The Central Bank of Brazil announced that the country's current account deficit fell 43% in 2015 compared to 2014, totaling $59 billion. This improvement was offset by $75 billion in foreign direct investment, resulting in a $16 billion surplus. The announcement of better current account results and an exchange rate adjustment that improves competitiveness should boost perceptions of the Brazilian economy's vitality and encourage domestic and foreign investment. A former Chinese ambassador to Brazil argued that issues in Brazil are more political than economic, and that the country has strong sectors and growing foreign reserves.

1. IMPROVEMENT IN BRAZIL’S CURRENT TRANSACTIONS REASSURES
INVESTORS.
By Durval de Noronha Goyos
This week, on 26 January 2016, the Central Bank of Brazil (BCB) released
Brazil’s current account statistics for 2015. According to the figures
provided by the BCB, the Brazilian deficit in transactions in goods, services
and income from abroad fell 43% compared to the year 2014, totalling
US$ 59 billion, up from US$ 104 billion in the previous year. The result was
offset by foreign direct investment in Brazil in that period, reaching US$ 75
billion, which produced a surplus of US$ 16 billion.
By way of comparison, the US current account deficit exceeds US$ 400
billion and in UK it is more than US$ 114 billion. Canada, Australia and
India have approximately the same deficit as Brazil, but do not attract the
same volumes of direct foreign investment, nor have as significant
exchange foreign reserves. Nowadays, Brazil's foreign reserves are
equivalent to no less than 50% of those from across the Euro area,
composed of 17 countries.
The announcement of the good results should improve the outside
perception of the vitality of the Brazilian economy, after the necessary
exchange rate adjustment to a level consistent with reality. In the previous
years, the overvaluation of the Brazilian currency reduced the
international competitiveness of our economy and gave a perverse
incentive to foreign suppliers.
The Real was one of the four most overvalued currencies in the world.
Consequently, the purchases of goods and services abroad were
encouraged. With the exchange rate adjustment, our agribusiness, one of
the most efficient in the world, acquires even greater natural
competitiveness and our battered industry, undermined by years of
adversity in exchange rate policy, resumes the attempts to re-enter the
international markets. This process will certainly take a few months but

2. will surely have a favourable outcome by external experience gained by
many companies, including imports of goods and foreign goods, which will
be largely replaced.
The new perspectives of the Brazilian’s international competitiveness will
encourage domestic and foreign investment, in order to conquer new
markets and increase the supply. The economy therefore will react in the
second half of 2016.
This vision is shared by one of the largest Chinese Brazilianists, Chen
Duqing, former Chinese ambassador in Brazil, who published an article in
the Chinese press this month stating that the vilification of Brazil is very
exaggerated, that the Brazilian economy has many strong areas, that the
country's foreign reserves are intact and in growth bias, and that our
problems are more political than economic.