Brazil Anticipating US$ 35 Billion in Foreign Direct Investment This Year

Brazil's stock exchange Bovespa According to the projection of the Central Bank of Brazil, the country should receive US$ 35 billion in FDI in the whole of 2008. Foreign direct investment (FDI) inflow into Brazil reached US$ 3.24 billion in July, and totaled US$ 19.942 billion in the first seven months this year.

Figures disclosed last week by the Central Bank show that investment inflow in the corresponding periods last year was higher. In July, the total was US$ 3.613 billion, and the accumulated result from January to July 2007 was US$ 24.466 billion.

The sectors that received the most foreign direct investment this year were metallurgy (17.2%), financial services (14.8%) and mineral extraction (8.7%). The head of the Economic Department at the Central Bank, Altamir Lopes, also highlighted the sectors of real estate activities and construction of buildings, which are indicators of rising FDI shares, even though they do not receive the bulk of this type of investment. These segments answered to 4.6% and 4.2% of FDI inflow, respectively.

The current account balance (all transactions between Brazil and foreign countries) from January to July showed a deficit of US$ 19.512 billion, the highest value ever recorded during the period since the beginning of the Central Bank's historical series, in 1947. In the last 12-month period the deficit was US$ 19.94 billion, the highest for the period since March 2002. In July, the deficit of US$ 2.111 billion was the highest for the month since 1997.

According to Lopes, the reasons for the result in July were the increase in remittances of profits and dividends from branches of companies to their head offices abroad, heightening of interest payments, typical of the month of July, and expansion of the international travel account deficit.

To Lopes, the current account deficit should slowdown. The forecast is for the negative result to decrease to US$ 1 billion in August. "Should the result prove true, then we will have a reduction in net payments of services, profits and dividends, and the trade balance will behave well," he asserted.

The head at the Economic Department of the Central Bank of Brazil underscored the fact that the current account deficit is going to be financed by FDI, which is characterized by a lasting interest from investors in the enterprise at hand.

In August, up until last Thursday (21), direct investment inflow totaled US$ 4.5 billion, driven by an operation in the mining sector. The Central Bank expects to close the month at US$ 5.2 billion.

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