Historical and current altitude in foreign investments/M&A
A holistic view
The 90s were years of significant changes in the investment regime in Brazil, which opened up
more space for private investment, whereas the policies to foster public investment grew more
horizontal and less discriminatory among sectors. Specifically with regard to the treatment
offered to FDI, there was a reversal of the anti-FDI movement begun by initiatives adopted in
the 80s, thus allowing foreign investors full access to the sectors newly opened to private
investment. The regulation in place ensures the FDI access to the market and practically
unrestricted national treatment in the area of goods, while maintaining some significant
constraints as regards both market access and national treatment in service sectors[1].
Foreign direct investment into Brazil boomed between 2009-2011, but had been slowing down ever since. After 3 consecutive years of decline in FDI inflows, they have managed to start up again. According to the World Investment Report 2018 published by UNCTAD, FDI inflows increased by 2% between 2016 and 2017 and reached USD 62.7 billion. During that period, the country recorded a 22% drop in FDI, with investments reaching USD 25.5 billion. In the first semester of 2017, that number was USD 32.4 billion. Brazil is the 4th largest FDI recipient in the world, and the largest in Latin America, attracting more than 40% of total flows of the region. However, FDI in the country declined during the first semester of 2018, mainly due to uncertainties and tensions related to the presidential elections, according to Unctad. Acquisitions by foreign companies and high consumer spending attracted investments in 2017. FDI inflows in the energy sector trembled, while investment in the transportation and storage sectors quadrupled and in the manufacture sector doubled. Despite attracting declining FDI flows in 2017, the oil sector is expected to play a key role in the country’s economic recovery. This progression is offset by a decline in FDI inflows in the extractive industry, the financial sector and real estate activities. FDI stock increased by 10% between 2016 and 2017, and reached USD 778 billion by the end of the year. In 2018, the main investing countries in Brazil were the Netherlands, the United States, Germany, Spain, the Bahamas, Luxembourg, the United Kingdom, Canada, France and Chile. Investments were mainly oriented towards oil and gas extraction, the automotive industry, financial services, commerce, electricity, paper production, ITC, storage and transportation, the food industry, and mining[2].
Current (2019)
Brazil appears poised to enter a new era of foreign investment that would have a powerful impact on the country’s infrastructure development and its economic fortunes following years of economic volatility. The goal of new President Jair Bolsonaro’s government is to increase total infrastructure investment via partnerships or privatization. The government’s ambitious plan to boost the economy includes doubling investment in infrastructure to approximately US$65 billion per year by 2022. It is hoped that much of this new investment will come from foreign investors – and the government is now making a concerted effort to attract foreign equity in ways that will put the country on a new path to growth[3].
[1] https://www.iisd.org/pdf/2004/investment_country_report_brazil.pdf
[2] https://en.portal.santandertrade.com/establish-overseas/brazil/foreign-investment
[3] https://home.kpmg/xx/en/home/insights/2019/03/brazils-infrastructure-and-privatization-market-is-heating-up.html