A First for Brazil in 500 Years: Country Becomes a Foreign Creditor

Brazilian currency, the old real For the first time is its over 500-year history, Brazil has become a foreign creditor. according to the Brazilian Central Bank (BC). Brazil's monetary authority explained that this was only possible due to the reduction of the net foreign debt.

This occurs when the country's assets abroad, mainly in foreign currency reserves, are removed from the gross foreign debt. That is, foreign currency reserves and other assets are greater than the foreign debt.

According to the Central Bank, estimates for the January 2008 closing (to be disclosed next week), is that the volume of the net debt should become negative in US$ 4 billion, as the volume of money invested abroad is now greater than the foreign debt.

"This, in net terms, means that the country has become a foreign creditor, something completely new in the country's economic history," according to the Foreign Sustainability Indices for Brazil, disclosed by the BC.

According to the organization, the total net debt went from US$ 165,2 billion, at the end of 2003, to the US$ 4.3 billion credit estimated at the end of 2007.

To the Central Bank, the results in the foreign sector of the Brazilian economy in recent years show "unquestionable strengthening of the country's foreign situation", due to the trade balance figures (exports minus imports), current transactions (including the trade balance, services and unilateral income and transfers) and the record entry of funds into the country.

"Summarizing, when faced with an international scenery characterized by a considerable increase in uncertainty, by the volatility of foreign markets and by the deceleration of economic activity, the improvement of these figures tends to mitigate, although not totally eliminate, the impact of adverse external effects."

ABr

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