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A Few Reasons Why the World Is Taking Its Money to Grow It in Brazil PDF Print E-mail
Written by Alexandre Rocha   
Thursday, 29 November 2007

Brazil's Seara Alimentos was bought by Cargill According to information disclosed this Wednesday, November 28, by the Brazilian Central Bank (BC), the volume of capital that entered Brazil between January and October was US$ 31.2 billion, and more than US$ 2.2 billion in November, totaling US$ 33.4 billion.

The inflow of foreign direct investment (FDI) in Brazil from January until now has far surpassed the forecasts made in the beginning of the year by financial analysts and the BC.

The figure is a historic record and now the BC forecasts that FDI inflow should reach US$ 35 billion until the end of the year. Halfway through the year, the bank was forecasting a total of US$ 25 billion, and surveys revealed that the market was expecting something around US$ 23 billion, figures that were later revised. In 2006, Brazil received US$ 18.8 billion.

To the president at the Brazilian Society of Transnational Corporations and Economic Globalization (Sobeet), Luís Afonso Lima, three factors drove the performance: overall increase in worldwide FDI flow; greater interest from investors in emerging countries, such as Brazil; and the fact that the country is on the verge of receiving the "investment grade" rating from international credit agencies, which may occur in 2008 or 2009.

"The flow is growing in the world at rates unseen since the year 2000, when total FDI reached US$ 1.4 trillion, a figure that should be surpassed his year," Lima said. "Besides, emerging countries are increasing their share and Brazil tends to benefit, also due to the fact that the country is about to receive the investment grade," he asserted.

This quest for emerging countries takes place, according to him, as a consequence of the overload in more developed economies, where certain market niches will no longer grow. In other words, in order to introduce a product one must relocate the competition.

"This does not benefit Latin America alone, but especially Asia. Furthermore, the emerging countries themselves have become exporters of capital," he stated. Such is the case of Brazil, which invested abroad more than it received investments last year.

With regard to the country's improved rating by agencies, Lima said that historically speaking, capital flow into countries on the verge of obtaining an "investment grade" increases. "And after that the flow increases even further," he said.

In the assessment of the economist Júlio Gomes de Almeida, of the Institute for Studies in Aid of Industrial Development (Iedi), Brazilian companies and economy are now in the "international show window."

"Now, our economy and our companies are recognized as being solid. They should even have been in the show window for much longer, but this does not happen overnight, it demands a lot of work," he stated.

According to Almeida, the figures were influenced by purchases of Brazilian companies made by foreign investors over the course of the year, such as the takeover of company Seara Alimentos by the multinational Cargill, or the purchase of shares in Arcelor Brazil by Arcelor Mittal.

"Brazil is coming up as a consequence of the growing economy and the good shape that its companies are in," he said. He also claimed that if the FDI inflow this year came as a surprise to the market, to Iedi it did not.

For both analysts, the level of foreign investment in the country has changed. Lima believes that the trend points to more growth in the next few years, or at least for the current value to be maintained.

Along the same lines, Almeida claimed that should the crisis caused by the real estate bubble burst in the United States worsen, there may even be a decrease in the FDI flow into Brazil in the short term, but a recovery is sure to follow soon.

Anba - www.anba.com.br

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Comments (2)Add Comment
Why the World Is Taking Its Money to Grow It in Brazil ???
written by ch.c., 2007-11-29 21:15:52
The world total FDI is US$ 1300 billion annually.
The world population is 6,6 billion, Brazil 190 millions or 2,88 % of the world population.
And Us$ 35 billion equals to 2,7 % of the total FDI of Us$ 1300 billion.

YOU are not really getting more than your share of the world FDI.
Therefore the world is NOT taking its money into Brazil....more than your share of the world population.
Why the World Is Taking Its Money to Grow It in Brazil
written by Lloyd Cata, 2007-12-05 10:28:25
smilies/cheesy.gifEconomics 101
Buy low and sell high

They are buying your asse(t)s cheaply. If your resources and companies were fair-market priced there would not be the massive sudden increase in capital inflows. Given the attraction of the Brazil culture, the world demand for Brazilian commodities, and the epidemic corruption, it is a buyers market. The worthless dollars around the world are being dumped into the Brazilian economy. What would you do if you had a mountain of dollars right now? Of course, you would use them to buy something cheap while the dollar($) is dropping, so you could sell high when the currency recovers. Brazil has now become the safest haven to launder illegal money in the world. A giant money($)-washing machine with the added benefits of a malleable people, great climate, wonderful food... anything and everything is for sale. A glorious shining bubble.

A very good thing for the few who will benefit enormously. A measurable increase in the middle class numbers and salaries. Not too much, due to increased productivity through technology. More scraps for the poor from a larger feast on the masters table. Everyone gets something, eh?

Additional
smilies/grin.gif Upgrade military and security forces, both national and commercial. 'Private' heavily-armed security squadrons will be required to protect many foreign-owned assets. Local police will be overwhelmed initially by the sheer amount of money flowing into illegal activities. In consideration of the amount of money for everyone; a fragile truce will be instituted between the gangsters and the police. The traffickers, politicians, and police will agree to "neutral zones". Police salaries will increase slightly, with additional allotment coming from the illegal traffic proceeds. Corruption throughout this sector of the economy will threaten the judicial system, and possibly be the precursor to the return of military or autocratic rule. Several 'private' foreign security services will be used to protect both public and private holdings.

smilies/grin.gif Environmental and health concerns are negligible costs in Brazil. The environmental destruction, deforestation necessary to support the construction boom, and general pollution associated with emerging commodity markets will produce mountains of waste, trash, and toxins. Some extremely hazardous. Without adequate enforcement of environmental practices the chances for a major pollution event is quite high. Though the cost to settle any claims would be quite low, given the climate for corruption and the societies apparent disregard for human life. Health care is pay-as-you-go, so the increased use of health services will be good for the Brazilian medical industry and institutions. Health service for the poor will improve marginally, primarily to keep the working poor productive.

smilies/grin.gif Only a strong government will be able to manage in this market climate. Balancing the needs of the military, commercial, and public interests will be the test. The Brazilian judiciary will probably remain as the only organ of government or society unchanged in the short term. The Law remains, although the bar will be set very high in such a corrupt society, and the courts will remain 'relatively' independent. Relatively, because judges hear cases brought before the courts; prosecutors and security forces decide which cases to bring to court.

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