Opinion – Samuel Pessôa: Private investment grows

In 2021, investment in Brazil corresponded to 20.8% of GDP, that is, of the economy. This number was obtained at constant prices. It was not, therefore, influenced by the rise in investment goods that occurred after the “V” recovery of the world economy in the second half of 2020.

The investment nadir was in the 3rd quarter of 2017, when it reached 16.8% of GDP. That is, after our great economic crisis from 2014 to 2016, investment grew by four percentage points of GDP.

My colleague Manoel Pires, coordinator of the FGV-Ibre Fiscal Policy Observatory, has just released a historical series of public sector investment since 1947. Between 2017 and 2021, public investment remained constant.

In other words, the increase in investment between 2017 and 2021 was due to private investment.

In fact, my colleague from FGV-Ibre Gilberto Borça Jr., in a post on the Blog do Ibre, documented that one percentage point of GDP from the increase in investment was due to a purely accounting issue, associated with the change in the way the operation is accounted for. of new oil exploration platforms in Brazil.

In other words, since 2017, private investment, at constant prices and already discounting the overestimation of investment, as a result of the change in the way of accounting for the new platforms, has increased by three percentage points of GDP.

There is evidence that, since 2016, corporate profitability has risen. According to the Economática database, the cash flow of publicly traded Brazilian companies as a fraction of revenues — technically earnings before interest, taxes, depreciation and amortization (EBITDA), as a fraction of net operating income (NOR) — rose from 16 %, in 2014, to 28%, in 2021. It is understood, therefore, the reasons for the increase in investment. For publicly traded companies listed in the Economática database, investment rose from 2.6% of GDP in 2018 to 4% in 2021.

In the recent past, there has been another cycle of increasing return on capital. Between 1995 and 2004, EBITDA/NOR rose from 12% to 27%, then stabilizing at 25% from 2005 to 2007. From 1995 to 2007, investment by publicly traded companies rose from 1.5% of GDP to 6.7% of GDP, reaching a peak of 7.8% of GDP in 2008.

Everything suggests that companies, after our great crisis, have adjusted, renewed the adjustments in the pandemic and are profitable and ready to increase their investments even more.

Last Monday (25th), Insper launched the book “We do Brasil, Nossa Herança e Nossas Escolhas”, edited by Record, by my friend and recently sworn in as Secretary of Economic Development in São Paulo, Zeina Latif.

The objective of the book is to address our great stagnation of 40 years — between 1980 and 2021, the per capita product of the Brazilian economy grew at a rate of 0.7% per year, and labor productivity, at 0.6%.

After the first chapter, in which the numbers and the main economic facts are presented, Zeina goes on to deal with the topic in a cross-section, looking at it from numerous points of view.

Topics such as educational backwardness, historical roots, the Judiciary, our democratic institutions, the Armed Forces, failing citizenship, the lack of a middle class, public service problems, the press and finally our teaching and research departments in economics, with an immense weight of currents of heterodox tradition.

Interdisciplinary work, with erudition, supported by the best modern literature. A must-read for anyone who wants to understand how we got here.