Foreign investment in Brazil grows and totals US$ 4.7 billion in January, says BC

Foreign direct investments in Brazil totaled US$ 4.7 billion (R$ 23.7 billion) in January. The data were released by the Central Bank this Wednesday (23).

The amount was above the BC forecast for the month, which was US$ 3.2 billion (R$ 16.1 billion).

“The IDP’s surprise in relation to the projection basically refers to the reinvested earnings, which increased 75%. imaginable,” said the head of BC’s statistics department, Fernando Rocha.

In 12 months, the volume of foreign direct investments in the country totaled US$ 47.7 billion (R$ 238.8 billion), equivalent to 2.94% of GDP (Gross Domestic Product).

January’s result is 34.3% higher compared to the same month last year, when there were US$ 3.5 billion (R$ 17.7 billion) in investments of this type. The net balance was the highest recorded for January since 2018, when it reached US$ 8.3 billion (R$ 41.52 billion).

The flow turned positive again after divestments in December last year, when direct investments in the country had registered a negative balance of US$ 3.935 billion (R$ 19.9 billion). This means that there was more outflow than inflow of resources. At the time, the BC attributed the negative result to a strong increase in remittances of profits abroad.

“We have a seasonality in December, the headquarters abroad need to close their balance sheets, the subsidiaries around the world send a greater amount of profits and dividends. With this seasonality, we had a very large outflow of profits remitted last month. , reinvested earnings were negative, which contributed to reducing the December PPI”, Rocha explained.

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 the purchase of shares or government bonds.

In the month of January, US$ 4.4 billion (R$ 22.2 billion) were contributed 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 case, the remuneration for the investing company is based on the distribution of profits.

Intercompany loans registered a net inflow of US$ 307 million (R$ 1.5 billion). In the modality, when the parent company grants credit to its Brazilian subsidiary, the return of the foreign company is made with the payment of fixed installments within a determined period, with interest.

For February, the monetary authority estimates an inflow of US$ 10 billion (R$ 50 billion) of foreign direct investment in the country. This amount, if confirmed, will represent the largest volume for the month of February since the beginning of the historical series, in 1995.

“In December, the profit remitted was much above average, in January, much below. What is expected for February is to have profits reinvested in a normal parameter, according to the standard. We see, in this first part of the month of February , some operations of higher individual value being settled, which had not happened in more recent periods”, explained the head of the BC statistics department.

The monetary authority also announced, this Wednesday (23), that Brazil registered a deficit in the current account of the balance of payments of US$ 8.1 billion (R$ 40.6 billion) in January, compared to a negative balance of US$ 8, 3 billion (R$ 41.59 billion) in the same month last year. The autarchy estimated a deficit of US$ 8.4 billion (R$ 42.09 billion) for the period.

From January compared to the same month of 2021, there was a reduction of US$ 1.1 billion (R$ 5.53 billion) in the trade balance deficit, partially offset by increases in the deficits in services, US$ 507 (R$ 2.5 billion) billion) million, and in primary income, US$ 392 million (R$ 1.97 billion). In the 12-month period, the negative balance was US$ 27.7 billion (1.71% of GDP).

The negative balance in the services account in January this year is mainly due to the transport and international travel sector. According to BC data, there was a deficit of US$ 269 million (R$ 1.35 billion) in the travel account in January 2022, against US$ 39 million (R$ 196 million) a year earlier.

In the first month of 2022, Brazilians spent US$ 690 million (R$ 3.46 billion) on international travel, against US$ 308 million (R$ 1.54 billion) in January last year. This means that spending increased by 124% in comparison.

Foreign travelers who were in Brazil spent US$ 421 million (R$ 2.1 billion) in January, against US$ 269 million (R$ 1.35 billion) in the same month of 2021, which represents an increase of 57 %.

Rocha, from BC, considers that the growing numbers in 2022 reflect the impact of the pandemic on the sector in January last year, amid the wave of Covid-19 with the advancement of the Delta variant, remembering the travel restrictions.

The value of travel revenue has not reached the current level since February 2020, but it is still far from the numbers recorded in the pre-pandemic period. In the assessment of the municipality, the scenario suggests a gradual recovery of the sector. “There still seems to be a lot of room for recovery of the flows of both travel expenses and income,” he said.

For the month of February, the BC estimate for the result in current transactions is a deficit of US$ 2.6 billion (R$ 13.08 billion).

The monetary authority also reported that the rollover rate for medium and long-term loans obtained abroad was 99% in January, a result below the one verified in January of last year, when the rate had been 103%.