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.