Foreign Direct Investment Keeps Brazil’s Economy Afloat
Anyone who has been paying attention to the news about Brazil knows that the country’s largest corporations have been undergoing scrutiny because of corruption scandals. The gigantic state-owned oil company, Petrobras, the construction business, Odebrecht, and the country’s largest meat processing company, JBS, have all been implicated in criminal investigations.
But it is not just businesses that find themselves in trouble. Impeached President Dilma Rousseff was brought down in part because of her participation in mismanaging Petrobras funds. Now, investigations into a bribe reportedly offered by sitting President Michel Temer to JBS threatens to remove him as well.
While all of these internal economic and political crises have been playing out across Brazil, one thing has remained stable: foreign direct investment (FDI). In 2016, Brazil received a total of US$78 billion in FDI, the seventh highest in the world. Another US$70 billion is projected for 2017. Keeping investment numbers stable is likely due to a combination of factors, including high national interest rates and consistent large consumer markets, which place Brazil above countries like China and Russia for foreign direct investment.
Another factor that contributes to the high index of foreign direct investment is the rush of domestic companies selling their assets in the face of the country’s dire recession. And foreigners are jumping on the opportunities. Gazit Globe, an Israeli shopping center group, has invested US$635 million over the last four years, taking advantage of low prices and scooping up deals across Brazil. Many other foreign investors have done the same. Instead of fleeing in the face of instability, foreign companies have swept in to buy up companies in peril. Now they are simply waiting for the crisis to turn around to cash in.
Though Brazil’s Labor Party warded off foreign investors with its focus on domestic economic policies, President Michel Temer and his Minister of Finance, Henrique Meirelles, have been vocal about welcoming foreign investors. They have even taking steps to reduce Brazil’s famous red tape and bureaucracy to speed up the process of opening foreign-owned companies. As the saying goes, with every crisis there are new opportunities. In the case of the current crisis in Brazil, foreigners are no doubt seeing dollar signs.