Favourable economy ‘attracting foreign investors to Brazil’
Recent months have seen foreign investment in Brazil from various sources, with reports also recommending this emerging market as a great opportunity for expansion.
Just this week, General Motors announced that it is to spend $1 billion (£608.4 million) on ramping up production at a factory in the southern state of Rio Grande do Sul, as the beleaguered car manufacturer aims to boost its sales outside of the US.
The recent tax break for vehicle buyers in Brazil has helped to increase demand in the country, leading to record trading levels in June, when sales soared by 21.5 per cent.
Retailers have also been getting in on the action, with a recent report by Planet Retail suggesting that emerging markets offer positive prospects for investors.
Wal-Mart Stores announced last month that it is to invest 1.6 billion reais (£506 billion) in Brazil this year, opening 90 new stores.
Tourism giants are also making the most of Brazil’s favourable economy and population demographics, with InterContinental Hotels Group recently revealing its intention to develop four new Holiday Inn Express properties and convert an existing independent full-service Holiday Inn.
Flavio Marega, minister councillor responsible for economic and financial issues at the Brazilian Embassy in the UK, believes that the trend of multinational firms expanding in the South American country is set to continue.
“In terms of macroeconomics, Brazil is in a very positive moment, perhaps as we have never had before. Our macroeconomy is in very good shape, in terms of public debt, inflation, so that generates a very positive economic environment,” he says.
“This is one of the reasons why we haven’t felt the crisis so badly in Brazil as in other countries.”
Mr Marega says the size of the economy and the population also make it attractive to foreign firms.
“We are the fourth market now for bonds, securities, etc, because we have merged our futures with the stock exchange,” he adds.
The recent oil discoveries off the coast of Sao Paulo and Rio de Janeiro have also contributed to the enhanced appeal of the country.
“You have this new oil reality, which is going to attract a lot of investment, and we hope also British investment, due to your knowledge on the North Sea exploitation, so you have a combination of factors that are very positive in terms of the future of the Brazil economy,” Mr Mantega confirms.
He suggests that oil and gas will be a major area of investment in the coming years. Infrastructure could also attract spending from overseas, as the road and rail network in the country can still be improved.
The insurance market is also one open for foreign direct investment, as until recently there was a monopoly of the reinsurance market.
It was broken in 2000 but a legal dispute over whether it was constitutional to end the monopoly occurred, before a supreme court ruling sanctioned the diversification of the market.
“Lloyds is also increasing its participation in Brazil – so insurance for sure is another sector that we can point out is attracting a lot of foreign investment,” Mr Mantega says.
Indeed, research from Accenture shows that the majority of insurers plan to expand into emerging economies, with the so-called BRIC countries – Brazil, Russia, India and China – named as the most appealing opportunity opportunities.
“Having already maximised their domestic footprints, carriers are looking to emerging markets, where premium growth is significantly higher because of catch-up dynamics,” said Serge Callet, managing director of Accenture’s insurance practice.
