Brazil Lost $285B in Foreign Investment: Daily

Emerging markets are beginning to feel the effects of state intervention in their economy, says The Financial Times.

By William Jones, Contributing Reporter

RIO DE JANEIRO, BRAZIL – According to the British business daily newspaper, The Financial Times, Brazil has lost close to US$285 billion worth of foreign investment between January 2011 and November 2013, citing figures from Brazil’s Central Bank.

Brazil Lost 285B in Foreign Investment, Rio de Janeiro, Brazil News

A market expert says BNDES is subsidizing more loans for the public sector at the request of Brazil’s government, photo by Rodrigo Soldon/Flickr Creative Commons License.

The figures published by the business newspaper take into account the inflow of capital in the three year period, which is around US$260 billion, and the reduction in assets held by foreigners, which have reduced in value by US$24 billion. The FT added that this downturn meant that the US$260 billion that entered the country’s economy have been essentially “destroyed.”

The newspaper says that the reason behind the losses were due to the devaluation of assets in the country and the worsening currency situation. The currency problem continued this week for Brazil’s economy, as the real reached R$2.41 to the U.S. Dollar.

Some experts believe government intervention in the economy is a factor affecting diminishing investments. The market expert and current director of emerging markets at Citibank, David Lubin, told The Financial Times that this has been demonstrated by the changing roles of private and public banks since the problems arose. “One problem for investors is the difficulty to trust the growth model from Brazil,” he said.

“During the years before the crisis, private banks accounted for two-thirds of credit and public banks in Brazil a third. But while private banks were nervous to the extent of borrowing for consumption and restricted grants, the government ordered public banks to advance. Now they account for more than half of all credit, much of it in subsidized loans provided by BNDES, the development bank,” Lubin added, as per the FT.

Emerging markets strategist at Deutsche Bank, John-Paul Smith, also warned that state intervention could also be hampering other BRICS countries like South Africa, as well as Turkey. However, the newspaper said that the damaging effects of such a heavy-handed interventionist policy are yet to appear.

Read more (in Portuguese).

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  1. Pingback: Brazil’s Risk Premium Rises Sharply in Credit Default Swaps (CDS) | The Rio Times | Brazil News

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