Foreign direct investment in Brazil drops 26% in August – 24/09/2021 – Market

Direct investments by foreigners in Brazil totaled US$ 4.5 billion in August, down 26% from the previous month. The data were released by BC (Central Bank) this Friday (24).

The volume was below the monetary authority’s estimate for the period, which was US$ 5.8 billion.

Direct investments in the country are made by companies that establish a medium and long-term relationship with the country and are less volatile as they involve longer-lasting decisions.

According to preliminary data until last Tuesday (21), US$ 3.6 billion were invested in September. The BC expects the month to end with an inflow of US$ 5 billion.

In the twelve months ending in August, this type of investment totaled US$49.4 billion, equivalent to 3.12% of GDP (Gross Domestic Product).

“Direct investments in August were a little below the BC’s estimate, but higher than the same month of the previous year, of US$ 2.6 billion. With that, the accumulated volume increased”, pointed out the head of the BC’s statistics department. , Fernando Rocha.

The entry of these applications in the country was impacted by the pandemic. With the crisis, these investments plummeted in 2020. Compared to the previous year, the volume of applications fell by half. In all, US$ 34.1 billion were invested in the country in the period, against US$ 69.1 billion in the previous year. The number was the lowest since 2009, when US$ 31.4 billion were invested.

Investments by foreigners in the Brazilian stock market, investment funds and government bonds totaled US$ 1.2 billion in August, the same volume registered in July.

During the period, foreign investors preferred safer papers and withdrew US$170 million in shares and investment funds. The outflow was offset by a net inflow of US$ 1.4 billion in government bonds.

In July, the entry of foreign investments in the domestic market had fallen 77% compared to June after turmoil on the B3 (Brazilian Stock Exchange) with the threat of the delta variant of the coronavirus, water crisis and rising inflation, factors that remained on the radar of investors in August.

In May and June, investments of this type were significant, with US$5.9 billion and US$5.1 billion, respectively.

Preliminary data for September show that the level is likely to remain low in September, with an inflow of US$ 918 million until last Tuesday.

In the 12-month period, net inflows of portfolio investments totaled US$43.7 billion. In the same period of 2020, there was a net outflow of US$ 42.8 billion, under the impact of the Covid-19 pandemic.

“That exit caused by the initial uncertainty [da pandemia] has already been fully reset. September still indicates net income,” said Rocha.

In March of last year, when the virus reached the country, foreigners withdrew US$ 22 billion from the Brazilian bond market, which had registered negative results until May.

This type of investment usually declines in turbulent months because it is very sensitive to momentary crises and noise.

Brazilians spent US$ 447 million on international travel in August, US$ 177 million more than in the same month in 2020. For Rocha, with the advance of vaccination and the relaxation of rules for entry in some countries, he encouraged tourists.

“The volume, however, is much lower than that observed before the pandemic,” he pondered.

In August 2019, for example, Brazilians disbursed US$ 1.3 billion abroad. Despite the improvement, the high dollar, fear of contagion and ongoing restrictions still impact international travel.

“It’s a gradual recovery, but there is a clear trend [de alta]”, said the BC technician.
According to Rocha, tourism should return with the end of the pandemic, but business travel may have permanent changes, with the increase in virtual events and conferences.

Foreigners spent US$ 251.6 million in Brazil in the month, compared to US$ 146.3 million in August 2020.

According to the BC, in August the external accounts had a surplus of US$ 1.7 billion, the best result for the month since 2006. In the 12 months, the result was negative by US$ 19.5 billion.

The BC’s projection for September is a deficit of US$ 1.9 billion in current transactions.

The trade balance had a positive result of US$ 5.6 billion in August.

Exports totaled US$ 27.4 billion in the month, an increase of 56% compared to the same period last year. Imports totaled US$ 21.7 billion, up 72.4% on the same basis of comparison.