Brazil as an emerging market and the importance of Foreign Direct Investment (FDI)
- The economic and social situation of Brazil.
- Brazil as an emerging market.
- What are the macroeconomic facts sustaining this emerging market?
- What are the macroeconomic facts threatening this emerging market?
- F.D.I. in Brazil.
- Has Brazil created an attractive environment to F.D.I?
- A closer look to the history of F.D.I in Brazil.
- Evolution of the F.D.I between 1996 and 2007.
- Which sectors benefits from the F.D.I?
- Which countries invest the most in Brazil?
- What are the main factors encouraging the F.D.I?
- What can discourage investors?
- Reference list.
With its free market and export-oriented economy, the Federal Republic of Brazil is currently the leading economic power in Latin America as well as a strong regional leader. The country is nowadays attracting many foreign direct investment (FDI) inflows thanks to efficient macroeconomic reforms notably. But it is to say that the country faced many economic issues in the past to finally be considered by foreign investors as one of the best location in Latin America to develop activities. After providing an economic and social profile of Brazil, we will determine what are the factors threatening and sustaining this emerging market, and finally we will provide a deep analysis of F.D.I. inflows in Brazil (nature and importance of F.D.I., are the national institutions supportive of foreign investors? and so on). According to the C.I.A. website (Central Intelligence Agency, The World Factbook: Brazil, 2007), the Brazilian G.D.P. was evaluated to U.S. $1.655 trillion (2006 est.), with a real growth rate of +3.7%, for the same year.
[...] A ?Price Water House Coopers? business survey (2005), reports that 45% of companies operating in Brazil have experienced some kind of fraud during the last two years (Business Anti-Corruption Portal, Brazil country profile and Invest in Brazil Brazil Investment Climate). It is to say that both foreign and Brazilian companies are affected by the high incidence of corruption and bribery within the territory. Regarding the characteristics of the human capital (Human Capital and Income Concentration in Brazil and Education in Brazil, 2006), we can highlight a good life expectancy at birth for the total population: 72.24 years (C.I.A est.). [...]
[...] In 2000, Brazil still attracted lots of F.D.I, mainly because of the privatization of the state owned banks and telecommunication infrastructures (Foreign Direct Investment and Globalisation in Brazil, 2005) In 2001 and 2002, the level of F.D.I. in Brazil considerably reduced. Indeed, floating exchange, inflation under control and the financial crisis in Argentina with its repercussions to many Latin American countries were factors preventing instability and discouraging foreign investors. In 2003, the F.D.I. decline still continued. To change that situation, the new Brazilian President Lula da Silva decided to improve investment conditions as well as macroeconomic conditions. [...]
[...] In addition, macroeconomic adjustments, innovation in the business sector and an improved formal labour utilisation are the main current challenges to strengthen Brazilian company's competitiveness (O.E.C.D, Economic Survey of Brazil and C.I.A. website). In addition, it is important to mention that the administration procedures are quite complex in Brazil. For example, the process of registering a business involves 17 procedures and can be expected to take 152 days on average. Furthermore, in order to gain access to the majority of venture capital companies in Brazil, a foreign investor must have a physical presence within the country and employ Brazilian people only. [...]