Alexandre Rocha*
alexandre.rocha@anba.com.br
São Paulo – Brazil ranks fifth in the ranking of most attractive countries for foreign direct investment (FDI), losing only to China, India, the United States, and Russia. The figures were taken from a survey disclosed yesterday (04) by the United Nations Conference on Trade and Development (Unctad), conducted among 192 of the largest transnational companies in the world.
Besides Brazil, only Mexico, of all Latin American nations, features in the list of the 10 most attractive destinations, in the 9th position. Other countries in the region rank much lower, such as Argentina, in the 29th position, Venezuela, in 31st, Chile, in 37th, and Peru, in 40th. According to the survey, market size and growth, as well as access to natural resources, were the factors most cited by the companies to justify investments in Latin America.
Although the survey includes investments forecasted up to 2009, in the case of Brazil, a rise in the investment inflow is already taking place. According to preliminary data supplied by the Brazilian Central Bank, US$ 26.5 billion in FDI entered the country between January and August 2007, an amount that already surpasses total investments made last year, which stood at US$ 18.8 billion.
According to the Central Bank, during the period, the funds applied into Brazil came mostly from Holland, the United States, Luxembourg, Spain, and Germany. The sectors that attracted the most investments were sectors like basic metallurgy and steel industry, financial intermediation, metal mining, services paid to companies, trade, the chemical industry, manufacturing of coke, petroleum, fuels and alcohol, construction, the food and beverage industry and supply of electricity, gas, and hot water.
Widespread growth
Generally speaking, The Unctad World Investment Prospects Survey 2007-2009 reveals that the international FDI flow should grow during the period, despite the existence of concerns about financial instability on a global scale, and the protectionism practised by some countries. According to the Unctad, more than two thirds of the multinational companies that answered the survey intend to increase their foreign investment outflows by 2009.
The performance should occur in virtually every sector and in every country that headquarters multinational companies, due to the growth in the global economy, high profitability, and credit supply in the international market.
In the developing nations, the most common investment inflows should consist of funding for new enterprises, also known as greenfield investment, whereas, in developed nations, funds should enter mostly by means of mergers and purchases.
The Unctad informs that access to large and expanding markets was cited by more than half the companies surveyed as the main contributing factor for FDI, followed by access to funds, especially skilled manpower. Many companies have also cited access to cheap workforce as a reason for investing.
According to the survey, nearly half the companies surveyed plan on broadening their research operations abroad.
Regions
The most attractive regions to multinational companies are, in the following order, Southeast and South Asia, North America, the European Union, new European Union member countries, other developed countries, Latin America, other European countries, Southern Europe, Eastern Europe, Commonwealth of Independent States (formerly known as the Soviet Union), the Middle East, North Africa, and Subsaharan Africa.
With regard to the Middle East, 32% of the companies surveyed intend to increase their investments in the region, market expansion and access to natural resources being the most cited factors that motivate business.
Africa, on the other hand, ranks low in the list of most attractive regions. Most of the companies that intend to invest in the continent are seeking natural resources, local markets and, in the case of North Africa, cheap labour force, and access to international markets.
Nevertheless, the Unctad highlights the fact that the continent has important investment opportunities to offer, and that the investment flow into North Africa has already increased, mainly due to investments made by Gulf countries, which used to be made in the United States, but are now being applied into the Arab world, especially in real estate and infrastructure projects.
Other attractive features of the region include privatisations and industrial export activities, mostly in Egypt, Morocco and Tunisia, directed toward the European and Middle Eastern markets. Those three countries maintain trade agreements with the European Union and other Arab nations.
In the list of most attractive investment destinations, Egypt ranks 25th, the United Arab Emirates ranks 26th, Morocco ranks 30th, and Saudi Arabia ranks 36th.
*Translated by Gabriel Pomerancblum
