Political stability and strong economic fundamentals are the basis behind foreign investment in Brazil, currently at levels on a par with those last seen in 2007. With a number of key foreign companies investing heavily, Brazil continues to represent an excellent investment opportunity.
According to figures released by the Brazilian Central Bank, foreign direct investment (FDI) over the last 12 months in Brazil has reached US$66.5 billion. This is a similar amount to the levels in 2007 when Brazil was one of the world’s highest achievers in GDP growth with annual increases of around 7 per cent. FDI in the eight months from January to August this year rose by 8 per cent on the same period in 2013.
Regionally, Brazil is a leading light in terms of FDI. While foreign businesses continue to pour investment into Brazil, levels in the rest of Latin America and the Caribbean have dropped significantly by 23 per cent.
The latest big investor in Brazil is Jaguar Land Rover whose new plant in Itatiaia will be the company’s first wholly owned factory outside the UK. The plant in the west of Rio de Janeiro state has received investment to the tune of US$290 million and will create around 400 jobs. Manufacture of the new Land Rover Discovery Sport is scheduled for 2016.
Other international car manufacturers who remain very optimistic about the prospects for business in Brazil include BMW and the Chinese Chery International. At the recent Sao Paulo Car Show, both companies presented new models they intend to make at their plants in Brazil.
For its part, the Economist Intelligence Unit (EUI) is opening an office in Sao Paulo this year. According to EUI’s regional director, Irene Mia, “Brazil’s attractiveness for FDI remains huge”.
Economic news from Brazil over the last few months has been dominated by slow growth and rising inflation, but the increasing levels of FDI confirm the country’s strong economic fundamentals. These include political stability and record low levels of unemployment – September’s 4.9 per cent was the lowest September figure since 2002.
In addition, Brazil has a giant consumer market that remains unaffected by lower levels of GDP growth. For example, Brazilian buyers make up the world’s third largest market for cosmetics and laptops, and the fourth largest for cars. The market for luxury goods also continues to rise – Jaguar Land Rover expects sales of high-end cars in Brazil to grow from the current 2 per cent to 4.5 per cent by 2020.
The consumer market figures plus Brazil’s underlying economic strengths are well-established as is clearly recognised by the buoyant levels of FDI. Strong levels of foreign investment in Brazil are obviously here to stay.