Foreign investments in Brazil more than doubled in the first two months of the year 2021. The country has become fertile ground for companies around the world, who are looking for potential consumers. In total, US $ 10.8 billion in direct investments came in, more than double the amount registered in the same period in 2020, surprising market analysts.
When we talk about potential consumers, we are referring to half of the 208 million people who are in the middle class, with access to good levels of well-being and consumption. These are data from 2020, from the Ministry of Foreign Affairs and International Cooperation.
To make the numbers clearer, nothing better than showing real examples. Although immersed in a crisis caused by the Covid-19 pandemic, companies like iFood recorded 50% growth between March and August 2020. According to the Consumidor Moderno website, in August iFood reached the mark of 236 thousand restaurants on its platform in more than a thousand cities and a total of 44.6 million orders.
Returning to the direct investments injected in Brazil in January and February, in addition to generating profits for companies, they may come to generate jobs for Brazil. This is what happens when medium and long-term projects are prioritized. By the end of 2021, the government estimates that there will be an inflow of US$ 60 billion.
The promising scenario puts the country on an equal footing with India and China, two other emerging countries. This projection was released by the Organization for Economic Cooperation and Development (OECD) in a report published in February this year.
Find out which sectors are growing
Brazil has increased its investments in technological infrastructure and in the qualification of its professionals. The result of this measure is evident in sectors of the market that have been achieving ever greater profits. The website of the Brazilian Export and Investment Promotion Agency (Apex-Brasil) presents this information in the article Priority Sectors, which cites which sectors are involved. We highlight here:
- Agribusiness: Brazil has become one of the largest agricultural producers and exporters in the world in the past two decades. The title is due to the growth and investment in research on tropical agriculture technologies and development.
- Automotive: corresponds to 23% of the country’s industrial GDP and generates 1.5 million jobs in its production chain. Asian component and auto parts companies are forecasting increased investment in Brazil.
- Renewable energies: Brazil is the seventh country in the world in terms of investments in clean energy and the sixth most attractive. Wind power is already the fastest growing source of electricity in the country.
- Life sciences: the enormous potential, increasing health expenditures and an increasingly elderly population are factors that have attracted multinationals.
- Oil and Gas: according to the World Oil Outlook, published by the Organization of Petroleum Exporting Countries (OPEC), Brazil will be one of the largest suppliers of conventional oil in the regions of developing countries, ahead of current OPEC member countries.
- Infrastructure: investment in this area has almost tripled in recent years, rising from R$ 48.6 billion (USD 15.5 billion) in 2007 to R$ 130 billion (USD 41.5 billion) in 2014, considering public and private capital.
The country’s growth in these sectors is a big spotlight for foreign investors. During the opening of the 2019 edition of the Brasil Investment Forum (BIF), held in São Paulo, the Minister of Civil Affairs, Onyx Lorenzoni, stated that if the investor came to Brazil, it is because in addition to being a safe environment, it is a market that will have high profitability.
The 2021 edition of BIF will be held in online format on May 31 and June 1. It will highlight investment opportunities in these strategic sectors. On the occasion, improvements in the business environment in Brazil will be discussed.
How Brazil remained on the rise even after the 2008 crisis
Considered the worst crisis since 1929, the 2008 crisis was caused by the bursting of a housing bubble in the United States. The increase in property values was not accompanied by an increase in the population’s income.
As we live in globalization, the tragedy affected the whole world, including Brazil. Despite the difficulties faced, the country remained with a good evaluation. Among other positive data, there was an increase in Brazilian investments abroad, and an increase in international investments in the country.
This was the result of measures taken by the Brazilian government at the time to reduce the effects of the crisis. Such as the intervention of the Brazilian Central Bank in the foreign exchange market to contain the declines in the financial market and the granting of lines of credit and financing for the maintenance of agricultural and industrial production.
Expectations for the coming years
Despite the prominence and increase of negative news about Brazil’s economy, often disseminated for political reasons, the Brazil of the future will continue to grow. This is what the team of experts at Banco Safra affirms, which credits the positive forecasts for the good performance of the agricultural sector and the robustness of international reserves.
By Giacomo Guarnera, partner at GSA Advice, which has been advising foreign investors in Brazil for thirty years.
About GSA Advice:
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