Brazil ranks 3rd in FDI Confidence Index
Brazil ranks 3rd in FDI Confidence Index
Despite diminished global economic optimism and concern over the U.S. economy, global executives will likely continue to increase their investments abroad, according to the latest FDI CONFIDENCE INDEX(r) report released on by global management consulting firm A.T. Kearney.
After US and China, Brazil moves up one spot to the 3rd position, displacing the United Kingdom and increasing its market attractiveness score. Nearly one-third of the CEOs have a more positive investment outlook toward Brazil compared to only 7 percent of executives who expressed a more negative outlook compared to last year. Brazil was the top destination of choice for first-tine investments most seriously being considered for the next three years, with 20 percent of decision-makers expecting to commit new investments to Brazil. This improvement of perception suggests that investors applaud the sound economic policies that the government has followed since the 1999 financial crisis.
Brazil reportedly attracted a record amount of foreign direct investment last year, with US$ 33.5 billion flowing into the country, up from US$ 31.5 billion in 1999. Much of the FDI revenue from Brazil came from the sale of state enterprise, such as banks and telecommunication services. Privatization and subsequent foreign competition have served as incentives for Brazilian firms to seek higher levels of efficiency. The sale of state-owned firms has also helped to cut the size of the government. Investment outside of privatisation also peaked in 2000, rising by almost 20 percent to US$ 26.5 billion. The record amount of non-privatization investment is an important trend for Brazil as the government will not be able to continue to depend on privatisation revenues in the future.
As the world's fifth largest economy, Brazil has a modern and diversified productive sector and strong financial and democratic institutions. Brazil experienced healthy economic growth last year, 4 percent of GDP compared to only 0.9 percent of GDP in 1999. This improvement of growth figures can be credited to export and industry-led growth. Fiscal and monetary discipline has kept inflation controlled and government envisions sizeable fiscal surpluses in the primary sector, which in turn will be used to gradually reduce public debt sector debt. Almost one million jobs were created in 2000, bringing the unemployment rate down to 7 percent. In July 2000, under the improved economic conditions, the Central Bank reduced interest rates.
Spanish CEOs rank Brazil as the most attractive destination for FDI and indicate a very likelihood of investment. Spanish investment was the largest source of FDI into Brazil last year, topping 21 percent of the country's total inflows and, for the first time, surpassing the United States as the largest source of FDI inflows. The largest acquisition in Brazil in 2000 was made by the Spanish firm Banco Santander Central Hispano, which acquired the Brazilian state bank BANESPA for US$ 3.6 billion. American and French executives also indicate a high likelihood of investment. Brazil is the second and third most preferred destination of American and French CEOs respectively.
Primary-sector executives find Brazil the second-most attractive destination for FDI with 80 percent of primary sector CEOs indicating a high or medium likelihood of investment. The primary sector ranks Brazil the highest-among all sectors of the emerging giants.