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Brazil’s Share of World Investment Grows from 1.7% to 3%

The Brazilian share of worldwide foreign direct investment (FDI) has grown. According to the report published last week by the Brazilian Society of Transnational Corporations and Economic Globalization (Sobeet), country participation as a destination for capital has risen from 1.7% in 2003 to 3% in 2004.

This is the best percentage since 1998, when participation reached 4.7%. The volume of funds invested in the country rose from US$ 10.1 billion in 2003, to US$ 18.2 billion last year, a growth of 79%. In absolute terms, this was the best performance since 2001, when the country received a total of US$ 22.5 billion.

"Brazil always had good participation in the world economy. As a large developing country, it is also a great receiver of foreign investment. Beside China, Brazil is always in the list of three main destinations for foreign funds in developing countries," said the chief economist of the Sobeet, Fernando Ribeiro.

Industry was the sector that received the largest volume of foreign investment last year, with 52.8% of the total, followed by the service sector, with 41.9% and the primary sector (agriculture, livestock and mining), which received the rest.

The performance of industry was strongly influenced, according to the Sobeet, by the share swap between Brazilian company Ambev and Belgian brewery Interbrew, companies in the beverage sector that merged.

The value of the transactions that took place between both companies in August last year, according to the Sobeet, was US$ 6.1 billion.

In this sense, within the industrial sector, the food and beverage segment received 26.4% of total foreign investment, followed by the chemical industry (6.7%) and auto industry (4.2%).

In the area of services, which is traditionally a strong collector of foreign funds, the highlights were telecommunications (14.7%), trade (6.2%), the electric energy, gas and hot water sector (5.9%) and the financial sector (banks), with 4.6% of the total.

According to Ribeiro, one of the factors that most influenced the flow was the 5.2% growth of the country Gross Domestic Product (GDP) of Brazil last year.

"Industrial production, for example, grew as had not been seen since the Cruzado plan," he said, referring to the economic plan adopted in Brazil by then president José Sarney (1985-1990).

According to Ribeiro, the economic policy of the Brazilian government, with the reduction of expenses, the establishment of inflation targets and the primary surplus, among other measures, have also helped.

He went on to say that despite the criticism that the orthodox economy receives from some sectors, the management of the economy is considered by investors "serious, coherent and with clear objectives."

Together with these two internal factors, in the foreign area, according to Ribeiro, there has been growth of the world economy since the 1970’s.

The growth of the world GDP was 5.1%, which made the global flow of FDI grow from US$ 580 billion in 2003, to US$ 612 billion in 2004.

Apart from that, the performance of stock exchanges, that had been dropping since 1999, improved last year.

Ribeiro recalled that it is at stocks exchanges that share exchanges take place, and that 90% of the world FDI movement takes place through mergers and acquisitions.

With regard to the origin of the funds invested in Brazil, Holland was in first place in 2004, with 38% of the total. This is due to the fact that the funds for the deal between Ambev and Interbrew, which resulted in the creation of Inbev, came from there.

Although Interbrew is a Belgian company, its shareholders and controllers are based in the Netherlands. The other main investors in the list are the United States (19.6%), Spain (5.2%), Germany (3.9%), Canada (2.9%), France (2.4%) and Italy (2.1%).

Geography

The analysis of the 2004 figures shows that there has been a change in FDI flows. The participation of developing countries as destinations has dropped from 67.9% in 2003, to 52.5% last year.

In the case of developing nations, the share grew from 35.9% of the total to 47.4%. In Latin America and the Caribbean, according to the Sobeet, there has been an increase in the volume of FDI for the first time since 1999. The total rose from US$ 54 billion to US$ 69 billion.

Brazil was the country that most received funds among the nations in the region, followed by Mexico and Chile.

Ribeiro believes that the figures for Brazil should remain at the same level in 2005, although the flow of funds to Latin America should grow.

"If the country economy continues progressing well, it should remain in the same relative position (among the destinations for investment)," he finished off.

Anba – www.anba.com.br

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