Foreign direct investment in Brazil grows and totals US$ 4.6 billion in November

Direct investment by foreigners in Brazil totaled US$ 4.6 billion in November, up 68% from the previous month. The data were released by the Central Bank this Wednesday (22).

The volume was above the BC forecast for the month, which was US$ 3.9 billion.

In October, there was a net inflow of US$ 2.5 billion (R$ 26.389 billion) in the modality. That month, the level of investments was 44% below September (US$ 4.59 billion). In November 2020, the volume was US$2.3 billion.

In 12 months, direct investments accumulated an inflow of US$ 51.5 billion, equivalent to 3.17% of GDP (Gross Domestic Product).

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.

In November, US$ 4.8 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$ 172 million. In this case, the return of the foreign company is made with payment of fixed installments within a specified period, with interest.

For December, BC’s projection is to enter US$ 3 billion in the modality. According to preliminary data, up to last Friday (17), investments of this type have accumulated a net inflow of US$ 1.68 billion in the month.

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 were invested in the country in the period, against US$ 69.1 billion in the previous year.

It was the lowest level since 2009, when US$ 31.4 billion were invested.

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 government bonds was positive in November, with a net inflow of US$ 989 million.

In 12 months, the balance of investments in the domestic market totaled US$ 32.1 billion.

In this modality, US$ 833 million were invested in government bonds and US$ 155 million in stocks and investment funds. In the 12-month period, the result was positive by US$ 38 billion.

This type of investment usually declines in turbulent months because it is very sensitive to momentary crises and political noise. In December, according to partial data, there was a net outflow of US$ 1.13 billion from the stock, fund and government bond market. This means that foreigners sold more papers than they bought in the period.

According to the BC, in November the external accounts had a deficit of US$ 6.5 billion. In the 12 months, the result was negative by US$ 30.8 billion (1.90% of GDP).

The BC’s projection for December is a deficit of US$ 6.8 billion in current transactions.

The trade balance had a negative result of US$ 2.5 billion in the month. Exports totaled US$ 20.5 billion, an increase of 17.1% compared to the same period last year. Imports totaled US$ 23.1 billion, up 45.6% on the same basis of comparison.