Brazil’s current account deficit: reason for concern?

Rocked by the economic crisis in Argentina and the swine flu outbreak in China, Brazil’s trade surplus hit USD 46.7 billion in 2019, below 2018’s USD 58.03 billion. That led Brazil to finish the year with a current account deficit of BRL 50.7 billion, or 2.76 percent of Brazil’s GDP, the biggest since 2015. But, is this important? And if so, why?

The current account deficit is a component of what economists call a country’s balance of payments, or BOP.

This is the resulting influx of wealth between a given country and foreign nations. It comprises current accounts—which includes transactions of goods and services, current transfers and investment income—and capital accounts, which concerns financial instruments, central bank reserves, and statistical imprecisions, as the data depends on information that is often hard to gather.

A positive BOP normally means the country is receiving more foreign investments, while a deficit makes it more vulnerable, as it will have to find ways to compensate for the lack of inflow by taking on debt or using up reserves. 

Considering Brazil is a developing country, it is natural for it to need foreign resources to fund its growth. However, as Fábio Alves—columnist for newspaper Estadão—points out,...