São Paulo – The Middle East, region where good part of the Arab countries are located, accounts for 4% of Brazilian companies’ investments abroad, according to a study released this Thursday (16) by the Brazilian National Confederation of Industries (CNI). The research is based on interviews with 28 Brazilian transnational companies which represent about one third of the country’s exports. Of this total, 22 are in the industrial sector.
The study also shows that Africa, another region where there are Arab countries, has 17% of multinationals’ foreign investments. South America is where these companies invest the most, with 53%, followed by North America, with 35%, European Union, with 19% and finally Africa. Asia (excluding China) accounts for 10%, China has 8%, and the Middle East 4%. Africa is the fourth destination for investments and the Middle East the seventh.
The study was prepared by the CNI in order to make recommendations on national public policies to strengthen Brazilian companies’ investments abroad. It shows that Brazil has had a hard time in keeping up foreign exchange flows. According to the entity, Brazil’s participation in global investments was at 1.96% in 1990, dropped to 0.65% in 2000 and reached 0.99% in 2012. China, on the other hand, went from 0.21% in 1990 to 2.15% two years ago.
According to the CNI, the main motivation for Brazilian companies to invest abroad is to have access to new markets. Other reasons include risk diversification in relation to the Brazilian economic cycle, production cost reduction when facing international competition, access to new technologies and cheaper inputs and access to markets with which the country has trade agreements.
The CNI states that there positive initiatives by the Brazilian Development Bank (BNDES) that encourage foreign exchange flow, but the Brazilian double taxation system reduces competitiveness and increases legal insecurities in investments abroad. The entity is asking the government of Brazil to expand agreements and avoid double taxation, eliminating automatic taxation of profits in companies abroad and developing investment protection agreements, among other measures.
Saudi Arabia and the United Arab Emirates are on CNI’s list as priority countries with which to seek agreements to avoid double taxation on investments. Other countries are the United States, Australia, Colombia, Germany, Russia, Venezuela, Paraguay, United Kingdom, Switzerland, Uruguay, Angola, Singapore, Guinea and Mozambique.
*Translated by Silvia Lindsey
