While traveling around the world in January and February Brazilian tourists spent close to US$ 2 billion. That was an increase of 66.69% over the same period in 2010, when tourists spent US$ 1.144 billion abroad. A Central Bank reports cites tourist spending as the biggest item in its services account, contributing in a significant way to the biggest ever February current account deficit: US$ 3.391 billion.
Brazil’s current account deficit is now a cumulative US$ 8,8 billion for the year and US$ 49.2 billion for the last twelve months. And the biggest increase in the current account was the item “services,” up 37.5% in January and February, compared to the same period last year.
Spending on foreign travel and international transportation represented 61.16% of the services account (international expenses totaled US$ 761 million, an increase of 54.1%; international travel cost US$ 441 million, up 7%).
Other items in the account were: equipment rentals (US$ 2.237 billion); computers and informatics (US$ 589 million); royalties and licenses (US$ 413 million); government purchases (US$ 375 million); and, insurance (US$ 210 million).
Spending on all these items in the account increased except for insurance, which was down 5.5%.
Tax Compensation
It seems like the Brazilian government will do pretty well in its decision to increase taxes so as to compensate for the fiscal impact of the 4.5% correction of income tax tables.
According to the Receita Federal (Brazil’s IRS), the government will lose 1.612 billion reais (US$ 973,000), but raise 1.750 billion reais (US$ 1. 56) with tax increases on beverages and credit card purchases abroad.
Most of the additional government revenue will come from the higher tax on beverages (basically an increase of 15% in taxes known as IPI, Cofins and PIS), that is expected to bring in R$ 948. The other R$8 02 million will come from an increase from 2.28% to 6.28% in the transaction tax on international use of credit cards.
According to Sandro Serpa, a Receita Federal subsecretary, the government is adhering strictly to the Fiscal Responsibility Law in this case. “The budget has to be balanced. A loss of revenue must be compensated for elsewhere,” he declared.
With the announcement of the correction and the higher taxes, the government also revealed that any difference in taxes paid before the new tax tables went into effect will be returned next year.
Brazil’s Central Bank monthly report on foreign transactions shows that remittances in February reached US$ 2.892 billion, an increase of 56.6%, compared to the same month last year. For the year, cumulative remittances reached US$ 6.562 billion, up 45%, compared to the same period last year.
Notably, remittances of direct investment income totaled US$ 2.204 billion in February, an increase of 77.3%, compared to February 2010.
Brazil had a current account deficit of US$ 3.4 billion in February, in spite of a balance of payments surplus of US$ 9.6 billion. The cumulative current account deficit for the last twelve months is now US$ 49.2 billion, which is 2.31% of GDP.
The most recent Central Bank report on foreign transactions shows that total inflow in February was US$ 12.8 billion, the highlight being direct foreign investment totaling US$ 7.7 billion. There was also an inflow of US$ 2.1 billion from Brazilian investments abroad.
