US$ 37 Billion: World Never Invested So Much in Brazil


Investment in Brazil

Brazil received US$ 37.4 billion in foreign direct investment (FDI), last
year, double the US$ 18.8 billion of 2006 and a historic record. The figure is
included in a preliminary report disclosed January 8 by the United Nations
Conference on Trade and Development (Unctad).

The amount exceeds forecasts by the Brazilian Central Bank made at the end of 2007, which estimated investment of US$ 35 billion for the year.


“The total broke the previous record, for 2000, when FDI reached US$ 33 billion, as did the volume of investment worldwide break the record for the same year, which had been US$ 1.4 trillion,” said the president at the Brazilian Society of Transnational Corporations and Economic Globalization (Sobeet), Luís Afonso Lima.


According to the Unctad, the global FDI flow was US$ 1.5 trillion last year. “Both flows, the Brazilian and the global, are related. Our record did not take place by chance, it is also related to what happened worldwide,” added Lima.


In Latin America, Brazil was the main receptor of FDI in 2007, ahead of Mexico (US$ 36.7 billion) and Chile (US$ 15.3 billion). Both countries also presented growth of over 90% in the inflow of investment. The funds turned to Brazil even exceeded those turned to developed nations like Japan (US$ 28.8 billion) and Italy (US$ 28.1 billion).


Latin America and the Caribbean received a total of US$ 126 billion, an increase of 50% over 2006. To the Unctad, the growth was boosted by greenfield investment (new and in expansion), rather than cross-border international mergers and acquisitions, one of the main factors for expansion of the flow around the world.


The interest in the region, according to the organization, was due to the strong regional economic growth and elevated corporate profits on the back of high commodity prices on the international market.


Brazil is a great producer of agricultural and mineral commodities and, according to the Unctad, the inflow of investment into the country was largely turned to industries that used local raw materials in production.


Luís Afonso Lima, from Sobeet, mentioned the case of mining and industries connected to the sector, like ironworks. “In this case, Brazil is both an active and a passive agent,” he said.


That is, the country both receives foreign investment and invests in business abroad. Some examples are Brazilian companies like mining company Vale do Rio Doce and ironworks Gerdau, which have important businesses abroad. At the same time, international groups, like Arcelor Mittal, make heavy investment in Brazil.


According to the Unctad, the FDI flow to developing nations reached US$ 438.4 billion last year, an increase of 15.7% in comparison with 2006. In the list of countries that was disclosed by the organization, Brazil was only behind China (US$ 67.3 billion) and Hong Kong (US$ 54.4 billion) among the emerging nations that received the largest volume of funds.


Russia also received a larger volume of investment, US$ 48.9 billion, but the Unctad places the country in another category, that of “transition economies”.


Still in the area of developing nations, the FDI inflow into Africa reached US$ 35.6 billion, 0.1% more than in 2006. The two countries that received the largest volume of funds on the continent were the Arab Egypt and Morocco. Investment in the former totaled US$ 10.2 billion, an increase of 1.6%, and in the latter, US$ 5.2 billion, growth of 78.6%.


According to the Unctad, the investment flow to the region was boosted mainly by mergers and acquisitions in the mining industry, in related services and in the banking sector.


In West Asia, which includes the countries of the Middle East, the FDI flow dropped 11.9% to US$ 52.8 billion. According to the organization, the Gulf States and Turkey are still the main destinations for investment in the region.


On the globe, according to the Unctad, the growth of investment reflected the tendency for growth of transnational companies and the strong performance of the economies of several countries. The great profit of companies and the abundance of money available made the value of international mergers and acquisitions, responsible for a large share of the flow, rise.


Unctad stated that despite a reduction in the value of mergers and acquisitions in the second half of 2007, the FDI turnover in the world was not affected by the mortgage crisis in the United States. The country is still the main destination for investment, with inflow of US$ 192.9 billion, an increase of 10% over 2006.


The United Kingdom, France and the Netherlands followed, with inflow of US$ 171.1 billion, US$ 123.3 billion and US$ 104.2 billion, respectively. In general, the FDI flow to developed nations exceeded US$ 1 trillion, 16.8% more than in 2006.


The Unctad warns, however, that there are threats to the growth of investment in 2008, including volatile commodity prices, increasing inflationary pressures, continuing global external imbalances, the possibility of recession in the United States and sharp exchange-rate fluctuations.


Anba – www.anba.com.br

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