Data from the Brazilian Central Bank shows that the country attracted USD 46.4 billion in foreign direct investment (FDI) last year, 23 percent more than in 2020. The results, however, say more about how abysmal 2020 was, rather than depicting a steep recovery in money inflows.
FDI is a key component of a country’s balance of payments, which measures how much money enters or leaves its economy through investment, foreign-exchange trade, profit remittances, or even tourism.
Despite remaining almost one-third below pre-pandemic levels, FDI was enough to cover the external accounts deficit, which widened by 14.8 percent in 2021 to USD 28.1 billion, as companies sent more profits abroad and service trade lagged. When FDI does not make up for the deficit, countries must resort to other tools, such as loans, to cover the gap.
However, concerning signs of a slowdown in FDI arose in December, when the balance of foreign investment in the country hit negative USD 3.9 billion — a result that has only occurred three times in history — and corporate profit remittances to international headquarters reached a record of USD 10.2 billion.
The Central Bank believes the month’s results were a blip, saying FDI will increase to USD 55 billion in 2022. However, experts suggest it was a warning sign that enterprises are becoming wary of Brazil’s economic and political environment.