Brazil sees foreign investment skid continue

Brazil received a net USD 3.3 billion in foreign direct investment in October.

The results were below market forecasts. Analysts predicted a result between USD 3.9 billion and USD 6.9 billion, according to monitoring platform Estadão Broadcast.

In the 12 months through October, foreign investment reached USD 57.5 billion, down 22.8 percent from the same period last year.

In its September quarterly inflation report, the Central Bank interpreted a consistent downward trend in foreign investment. “The main component responsible for the decline is inter-company operations, due to the net amortization of Brazilian companies in their operations with subsidiaries abroad (reverse investment), mainly, and the reduction in net funding from other modalities (loans between sister companies or between headquarters abroad and branches in the country), from the second quarter onwards.” 

The bank added: “Reinvestment of profits has also decreased, mainly due to the increase in profit remittances from non-resident companies.”

A drop in commodity prices also explains the downward trend. And some analysts say the visible decline may also indicate that foreign companies are still wary of Brazil’s economic and political environment. 

Investors may be waiting for a bigger cut in interest rates to make bolder moves, as the country’s borrowing costs remain high (12.25 percent per year), even after the first three cuts in the Central Bank’s new monetary easing cycle.

The Central Bank’s estimate for this year, which is unlikely to be met, is for foreign direct investment of USD 65 billion — a projection that was updated in September.

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