São Paulo – Net foreign direct investment (FDI) inflow in Brazil reached US$ 65.3 billion in 2012, according to figures released this Thursday (23rd) by the Central Bank. It was the second highest figure ever in the Central Bank’s historical series, second only to 2011’s US$ 66.6 billion.
The FDI flows seen last year sufficed to finance the country’s current transaction deficit, which amounted to US$ 54 billion, an all-time high figure equivalent to 2.4% of the Gross Domestic Product (GDP).
To the president of the Brazilian Society of Studies on Transnational Corporations and Economic Globalization (Sobeet), Luís Afonso Lima, the main attractor of foreign investment in 2012 was the domestic market, rather than exports and commodities manufacturing, which are other traditional investment-attracting factors in Brazil.
Such attractiveness, he said, stems from increased and better distributed income, and higher credit availability in the market. To that end, the executive noted that the top FDI-attracting sector was services, which outpaced industry, agriculture and mining. According to the Central Bank, the types of services that drew the most investment in were trade, financial activities, insurance, private pension plans, and healthcare plans.
The main issuer of FDI to Brazil in 2012 was the United States, which accounted for over 20% of the total. Lima believes investment tend to become more concentrated around the main sources.
However, he claims the number of investing companies is going up. In the past, multinational corporations were the main issuers, whereas now, smaller companies are setting up operations in Brazil. “These are new businesses,” he said.
Projection
Lima believes the performance seen in 2012 “will not necessarily last throughout 2013.” The reason is that “the large investment has already taken place” and the tendency of a higher number of lower-value deals should persist. Global FDI flows are on the way down, and competition among FDI target countries is increasing. “The cake is getting smaller, but competition is on the rise,” he said.
Despite the prospect of the Brazilian economy growing by a higher rate in 2013 than it did in 2012, Lima estimates that FDI inflow will be smaller this year, because, though more resistant, “Brazil is not immune” to the bad shape of the world economy, and should suffer the consequences. To FDI investors, one year with a high rate of GDP growth does not suffice. A stable, long-term outlook is worth more.
*Translated by Gabriel Pomerancblum
