Brazil reached last year a record US$ 34.6 billion (almost double the US$ 18.7 billion of 2006) in Foreign Direct Investment (FDI), reported the Brazilian Central Bank. FDI this year is expected to topple US$ 28 billion with an estimated record 4.5 billion in January.
Another area which in 2007 attracted record foreign capital was fixed rate bonds and the stock exchange, totaling US$ 39.7 billion compared to US$ 14.68 billion in 2006, with an all time record of US$ 8.7 billion last December, said Altamir Lopes, head of the Economics Department of the Central Bank.
However Lopes admitted that world financial turbulence has resulted in a net loss of US$ 1.8 billion in the local shares and bonds markets during January.
"Global financial and credit market turmoil has prompted investors to cash out of short-term investments that aren't directly related to the economy's future prospects, leading to an outflow of US$ 1.8 billion from Brazilian stocks and fixed-rate bonds so far this month," said Lopes.
For this year the Central Bank estimates an inflow of US$ 26 billion into the shares and bonds.
"In spite of the current volatility we observe a continued inflow of funds that hinge on confidence, economic fundamentals and the prospects of the Brazilian economy are going well. The outflow is a pattern common to all stock exchanges round the world."
Brazil ended 2007 with a positive current account of US$ 3.6 billion (0.27% of GDP, below the US$ 13.6 billion of 2006) given a significant reduction in the country's trade surplus and an increase in profits sent overseas.
Foreign investment has accelerated in Brazil as the central bank has built up credibility by beating its inflation target for two straight years at the same time that Latin America's biggest economy is expanding at the fastest pace since 2004.
The central bank's inflation target was first adopted in 1999. The bank now targets inflation of 4.5%, plus or minus 2 percentage points to account for unexpected price shocks.
Mercopress
