Bad Global Economy Puts Damper on Brazilian Investments Overseas

JBS Swift, a Brazilian multinational Brazil is acknowledging that the international financial crisis put a brake on the expansion of Brazilian companies' investment in the foreign productive sector. Figures supplied by the Brazilian Central Bank (BC)show that, from January to June, net return on funds invested outside of the country totaled US$ 1.798 billion.

The figures also show that the majority of revenues originated from intercompany loans, i.e., the supplying of funding from the head office to branches abroad, or from one branch in the country to another in a foreign country. In the first half, the return on intercompany loans was US$ 2.988 billion.

"In this case, the fact that there was a return is a sign that foreign projects funded by loans have been successful," explains the economic consultant and former Central Bank director Carlos Eduardo Freitas. Investment in foreign capital by Brazilian companies totaled US$ 1.190 billion.

Nevertheless, in comparison with last year, the figures point to a shift in internationalization projects by Brazilian companies. Just to give an idea, in 2008, foreign investment by Brazilian companies totaled US$ 20.457 billion.

This year, in the first half alone, investment totaled US$ 8.579 billion. Of that figure, intercompany loans represented US$ 2.318 billion, whereas investment in foreign capital was US$ 6.261 billion.

"There is no comparing last year with this one. In 2008, the global economy lived a moment of euphoria, with profits and added demand in expansion," said Freitas. The global financial outlook worsened late last year – in mid September.

To the president of the Brazilian Society of Studies on Transnational Corporations and Economic Globalization (Sobeet), Luí­s Afonso Lima, activities abroad are being affected by lack of credit and by lower prices on the foreign market.

In the evaluation of the economist at Tendência Consultoria, André Facconato, Brazil is in a "better situation than other countries worldwide".

"It is worth betting on the domestic market. Unemployment is growing less than in other countries, which is reflected in income, and the economy should not be as affected as those of other countries. This is a fact that also explains the growth of foreign direct investment in Brazil," he said.

Facconato believes that with the improvement of the global economic situation Brazilian companies should return to investing abroad. Freitas pointed out that Brazilian investment abroad is important to open markets for Brazilian exports and for the employment of Brazilians abroad.

"Therefore, the return of Brazilian investment is bad for the country," he said. According to Lima, it is not possible to know exactly where Brazilian investment abroad goes. This is because, due to fiscal incentives, Brazilian companies usually prefer to send funds to tax havens and from there to their end destinations.

ABr

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