Foreign direct investment in the country falls 44% in October, says Central Bank

Direct investments by foreigners in Brazil totaled US$ 2.5 billion (R$ 14 billion) in October, a 44% drop compared to the previous month. The data were released by BC (Central Bank) this Thursday (25).

The volume was below BC’s expectations for the month, at US$ 4 billion (R$ 22.4 billion).

In the 12 months up to October 2021, a net inflow of US$49.2 billion (R$275.6 billion) in direct investments was registered. “With these US$ 2.5 billion [em outubro] there was a reduction in direct investment in the country [na comparação] yearly. In the last 12 months it was reduced and was below 12 months until September [US$ 49,9 bi]”, stressed the head of the BC’s statistics department, Fernando Rocha.

In the period, US$ 3 billion (R$ 16.8 billion) were invested in Brazil through participation in the capital of companies, when the foreign parent company injects resources in exchange for a slice of the local business. In this modality, the remuneration for the investing company is based on the distribution of profits.

Intercompany loans, when the parent company grants credit to its Brazilian subsidiary, registered a net outflow of US$ 547 million (R$ 3 billion). In this case, the return of the foreign company is made with payment of fixed installments within a specified period, with interest.

Direct investments are carried out by companies that prefer to establish a medium and long-term relationship with a country, thus, they are less volatile than financial investments, such as buying shares or government bonds.

For November, BC projects inflow of US$ 3.9 billion (R$ 21.8 billion) in the modality. According to partial data for the month, until last Monday (22), investments of this type totaled US$ 2.7 billion (R$ 15.1 billion).

The entry of these applications in the country was impacted by the pandemic. With the crisis, these investments plummeted in 2020. Compared to the previous year, the volume of applications fell by half. In all, US$ 37.8 billion (a number revised by BC) were invested in the country in the period, against US$ 69.1 billion (R$ 387.1 billion) in the previous year. This is the lowest level since 2009, when US$ 31.4 billion (R$ 175.9 billion) were invested.

The BC adjusted data for 2020 and 2021 this month, based on the census of foreign capital.

The trend is for recovery in 2021, but the modality should still be below the level observed before the health crisis.

The flow of foreign investment in the Brazilian stock market, investment funds and public bonds was positive in October, with a net inflow of US$ 1.5 billion (R$ 8.4 billion), after a negative result in September.

In this modality, US$ 802 million (R$ 4.4 billion) were invested in government bonds and US$ 655 million (R$ 3.6 billion) in stocks and investment funds. In the 12-month period, the result was positive by US$ 38 billion (R$ 212.8 billion).

This type of investment usually declines in turbulent months because it is very sensitive to momentary crises and political noise.

With the relaxation of restrictions and advances in vaccination against Covid-19, Brazilian spending on international travel increased in October and reached US$ 530.9 million, US$ 57.2 million more than in September.

“The value is still far short of the pre-pandemic moment, but it has been growing month by month,” said Rocha.

In October 2019, for example, Brazilians disbursed US$ 1.5 billion abroad. Despite the improvement, the high dollar, fear of contagion and ongoing restrictions still impact international travel. “There must be a gradual recovery”, emphasized the BC technician.

Spending by foreign tourists in Brazil, in turn, grows more slowly. In October, there were US$ 265.8 million, US$ 29.5 million more than in the previous month.

According to the BC, in October the external accounts had a deficit of US$ 4.5 billion (R$ 25.2 billion). In the 12 months, the result was negative by US$ 26.7 billion (R$ 149.5 billion).

The BC forecast for November is a deficit of US$ 7.8 billion (R$ 43.6 billion) in current transactions.

The trade balance had a positive result of US$ 1.3 billion (R$ 7.2 billion) in the month. Exports totaled US$ 22.8 billion (R$ 127.7 billion), an increase of 27.8% over the same period last year. Imports totaled US$ 21.5 billion (R$ 120.4 billion), up 52% ​​on the same basis of comparison.