São Paulo – The Foreign Direct Investment (FDI) inflow into Brazil totalled a record US$ 48 billion last year, growth of 86.7% over 2009, according to the 2011 World Investment Report, disclosed on Tuesday (26) by the United Nations Conference on Trade and Development (Unctad). The previous record, US$ 45 billion, was registered in 2008. With this result, the country climbed from the 15th to the 5th position among the main global destinations for these resources, only behind the United States, China, Hong Kong and Belgium.
Brazil is also among the destinations that grew most from 2009 to 2010, both in percentages and in absolute terms, and was the country that received most capital in Latin America and the Caribbean. In total, the global investment flow grew just 5% in the same comparison, totalling US$ 1.244 trillion.
According to the president of the Brazilian Society of Studies on Transnational Corporations and Economic Globalization (Sobeet), Luís Afonso Lima, who presented the report in São Paulo, the market and consumption growth is among the main attractions of Brazil, which has "the dynamics of an emerging market and continental scale”.
Mentioning government figures, he pointed out that 33 million people climbed to the so-called "C class" (the middle class) over the last seven years and over 17 million should follow this route by 2014. "That is more than the population of Spain,” exemplified the executive. “Brazil is already the seventh main consumer market in the world,” he added.
Lima said that the great sports events to take place in the country in coming years – the 2014 Football World Cup and the 2016 Olympics – are other factors for attraction of investment, as well as the growth in the oil and gas sector.
According to him, industry has been losing space as an area of interest for investors over the last three years. In Brazil, the service sector and the mineral extraction sectors have been gaining importance, with oil as the vector.
This scenery is contrary to the global tendency. In the global scenery, industry was the only area to register growth in capital flows in 2009 and 2010, especially in sectors little affected by economic cycles, like food and beverages and garments.
To the Sobeet, in 2011 Brazil should receive around US$ 65 billion in FDI, which, if confirmed, should represent expansion of 35% over 2010 and a doubling of the flow in two years. According to a study by the Unctad, Brazil will be the 4th country in investor preference by 2013, only behind China, India and the United States, and ahead of Russia. It is worth recalling that the growth in FDI inflow into Brazil from 2009 to 2010 was greater than that registered in most developing countries and among the BRICs, including China.
Lima pointed out, however, that Brazil has bottlenecks and challenges in the medium and long term, among them the possible overheating of the economy, if it is not followed by infrastructure and production. "Inflation is just a reflection of that,” he said. Ideally, according to him, productive capacity and investment in infrastructure accompany economic growth.
Moderate optimism
For the global scenery, according to Lima, the Unctad report provides a message of "moderate optimism". Although in 2010 the investment flow grew for the first time since the international financial crisis, it did not come close to the record volume of turnover, of almost US$ 2 trillion in 2007. In the meantime, other indices, like industrial production and international trade, have already returned to pre-crisis levels.
The FDI profile has also changed. Last year, what grew most was the reinvestment of multinational company profits, as against investment of new capital. Furthermore, there was a retraction in the volume of flows turned to the service sector, especially in the financial sector, which shows that the area has not yet recovered from the crisis.
The 2010 performance also confirmed the tendency for greater participation of developing countries in reception of FDI. For the first time, the group of emerging nations and the so-called transition economies (Eastern Europe and the former USSR) exceeded the flow of investment to developed nations. “This is a firm tendency,” said Lima.
The same is taking place with regard to the origin of investment. Emerging and transition economies answered to 29% of investment in 2010. To Lima, up to 2017, this bloc should exceed developing nations as receivers of investment. In this area, Brazil is growing more than rich nations, with US$ 12 billion turned abroad in 2010.
To the Unctad, the global FDI flow should be between US$ 1.4 trillion and US$ 1.6 trillion this year, returning to 2007 levels in 2013. The hindrances that may arise in the middle of the way, according to Lima, are fiscal imbalances of sovereign debt of European countries and the United States, the extension of bank debt and, on the side of emerging nations, the overheating of economies and its reflex on prices.
*Translated by Mark Ament
