Rio de Janeiro – Greater market confidence in the Brazilian economy and speculative capital inflow explain the recent increase in Foreign Direct Investment (FDI) in the country, points out the coordinator of the Analysis and Forecast Group at the Institute of Applied Economic Research (GAP/Ipea), Roberto Messenberg.
This Wednesday (17th), upon presenting the bulletin Conjuntura em Foco (Conjuncture in Focus), in Rio de Janeiro, the economist said the sharp increase in direct investment began in late 2010 and is keeping steady. He warned, however, that some of that money may be “in disguise,” i.e. a significant share of the FDI may be going into speculative gains in the stock market.
“The Brazilian economy has become attractive due to its two channels for internationalization of foreign capital. In the first place, there is greater confidence in the behaviour of Brazilian economy. Another aspect is the movement of capital, which may in a way reflect an evasion from the measures of capital control adopted recently by the government. The capital may be coming in as direct investment, but in fact it may be meant to take advantage of the difference between domestic and international interest rates,” he explained.
In order for capital to be recorded as FDI, a minimum 10% stake in a company with voting rights is required. According to the economist, nothing prevents a purchase of an 11% stake in a company, through FDI, to be liquidated shortly thereafter, causing all requirements of long-term entrepreneurial commitment to become void.
*Translated by Gabriel Pomerancblum
