UPDATE 2-Brazil posts record current account gap for Nov

* Brazil posts Nov current account deficit of $4.7 bln

* Current account gap widens from a year ago

* Brazil attracts $3.73 bln in foreign direct investment
(Recasts, updates with comments, details and byline)

By Ana Nicolaci da Costa and Isabel Versiani

BRASILIA, Dec 21 (BestGrowthStock) – Brazil posted its biggest
current account deficit for November last month as the
country’s strong currency made it cheaper for Brazilians to
spend money abroad while the country’s trade surplus narrowed
by half.

Brazil’s current account deficit widened (BRCURA=ECI: ) to
$4.7 billion in November, as expected, from a gap of $3.3
billion in the same month in 2009, the central bank said on
Tuesday. That was the biggest deficit for November for the data
series that began in 1947.

Brazil’s real (BRBY: ) has appreciated about 12 percent since
May 25 — this year’s low — even as the government took a
series of measures to contain its rise.

That rally has helped the current account gap more than
double in the first 11 months of 2010 compared to the same time
in 2009.

Foreign direct investment will not be enough to plug the
hole this year, and Brazil will have to resort to more volatile
portfolio investment to finance its deficit.

Altamir Lopes, head of the economic research department at
the central bank, said increasing international travel by
Brazilians had contributed to the deterioration of the
country’s current accounts.

“Expenditures continue to grow in line with rising income,
with… social mobility that leads to travel abroad, with the
movement in the currency,” Lopes told a news conference in
Brasilia.

Meanwhile a strong currency has made it hard for exporters
to sell their products abroad and cheaper for producers to
import goods to meet a buoyant domestic demand. The trade
surplus in November fell to $312 million from $613 million a
year earlier.

PLUGGING THE HOLE

Brazil’s current account deficit between January and
November widened to $43.5 billion from $18.35 billion during
the same period in 2009.

The central bank expects Brazil to end the year with a $49
billion current account gap and revised higher its deficit
forecast for 2011 to $64 billion from $60 billion.

With foreign direct investment expected at around $38
billion this year and $45 billion in 2011, Brazil will have to
resort to portfolio investment both years to balance out its
accounts.

There will be plenty of that to go around, with the central
bank expecting portfolio investment to reach a record $51.3
billion in 2010, thanks to inflows from a massive
capitalization of oil giant Petrobras (PETR4.SA: ).

Portfolio investment surged to $50.45 billion between
January and November in 2010 from $42.8 billion in the same
time last year.

Investment in fixed-income however has slowed after the
government tripled a tax on foreign inflows into those assets
in October. The central bank cut its forecast on such
investments to $13.6 billion from $16 billion.

A country that relies on portfolio investment to finance
its current account deficit risks becoming more vulnerable to
volatility in international markets and the global economy.

Portfolio investment is considered more volatile than
foreign direct investment because foreigners can take their
money out of the country as quickly as they put money in.
(Additional reporting by Peter Murphy; Editing by Andrea Ricci)

UPDATE 2-Brazil posts record current account gap for Nov