Foreign Investments Fall for Third Consecutive Year in Brazil

By Lise Alves, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – For the third year in a row, foreign direct investment (FDI) in Latin America and the Caribbean fell by 3.6 percent over the previous year, totaling $161.673 billion dollars in 2017, according to ECLAC (Economic Commission for Latin America and the Caribbean).

In Brazil, the drop was higher (-9.7 percent), with investments of US$70.685 billion, a US$7.5 billion decline in 2017 from that registered in 2016.

“Foreign direct investment depends, above all, on whether or not there will be new business opportunities, whether there will be profitability of operations, and in Brazil there is still great uncertainty,” said Alicia Bárcena, ECLAC’s executive secretary, on Thursday during the release of the report.

According to Bárcena, Brazil is one of the most indebted countries in the region, with a debt above sixty percent in relation to its GDP (Gross Domestic Product). “For us, a sustainable debt should be below forty percent of the GDP,” she argued. According to the Commission Brazil’s gross debt exceeds R$5 trillion, which represents just over 75 percent of the country’s GDP.

According to the ECLAC, the continued decline in FDI in the region for the past eight years can be explained by the lower prices of basic export commodities and the strong economic recession registered in 2015 and 2016, especially in Brazil, which represents 43.7 percent of the total FDI received in Latin America and the Caribbean, weighed in this retraction.

The main sources of direct foreign investment in the region in 2017 were the European Union (42 percent) and the United States (28 percent). The prevalence of Europe is mostly seen in South America, while the United States remains the main investor in Mexico and Central America.

In its annual report, ECLAC calls on governments to encourage quality investments compatible with sustainable development.

“It’s not simply about creating the conditions for foreign capital to enter, it’s about attracting investments that become sources of technological, productive and employment-related overflow, and that are oriented toward sustained, inclusive and sustainable economic growth,” explained Bárcena.