Brazil Rises to 5th Place in FDI Inflows

According to the United Nations Conference on Trade and Development report released Tuesday, Latin America is emerging as a top global recipient of foreign direct investment (FDI). In 2010, global FDI grew by approximately 5%, while investments in Latin America alone swelled by an overwhelming 13%. Brazil is largely responsible for the rise; the country jumped in 2010 to 5th place from 15th in 2009 and experienced an 86.4% rise in its FDI. Investment from the U.S. contributed greatly to the increase in investment in Brazil; therefore, until the United States emerges from its current economic crisis, Brazil will continue to suffer a function of the crisis’ affects as well.

Given the mounting concerns surrounding excessive gains by the Brazilian Real, which is now worth R$1.53/US$, Brazil’s dependence on foreign markets for investors may be problematic. Exporters, for example, expect to find it difficult to sell goods abroad as they increase in value, therefore increasing in price. On the other hand, some assert that a stronger currency may be a possible means of fighting inflation in Brazil. Financial Minister Guido Mantega answered these concerns with suggestions involving broad-based tax reform, which would “boost efficiency and improve the national savings rate.” Brazil’s attention to the Real’s and foreign direct investment’s effect on the economy reflect the nation’s efforts to be recognized as a power economy in recent years as the domestic economy steadily grows.