MercoPress. South Atlantic News Agency

Record inflow of foreign investment to Brazil in 2007

Foreign direct investment in Brazil reached a record 34.6 billion US dollars (almost double the 18.7 billion of 2006) reported the Brazilian Central Bank. FDI this year is expected to topple 28 billion US dollars with an estimated record 4.5 billion in January.

Another area which in 2007 attracted record foreign capital was fixed rate bonds and the stock exchange, totalling 39.7 billion US dollars compared to 14.68 billion in 2006, with an all time record of 8.7 billion last December, said Altamir Lopes, head of the Economics Department of the Central Bank. However Lopes admitted that world financial turbulence has resulted in a net loss of 1.8 billion US dollars in the local shares and bonds markets during January. "Global financial and credit market turmoil has prompted investors to cash out of short-term investments that aren't directly related to the economy's future prospects, leading to an outflow of 1.8 billion from Brazilian stocks and fixed-rate bonds so far this month" said Lopes. For this year the Central Bank estimates an inflow of 26 billion US dollars into the shares and bonds. "In spite of the current volatility we observe a continued inflow of funds that hinge on confidence, economic fundamentals and the prospects of the Brazilian economy are going well. The outflow is a pattern common to all stock exchanges round the world". Brazil ended 2007 with a positive current account of 3.6 billion US dollars (0.27% of GDP, below the 13.6 billion of 2006) given a significant reduction in the country's trade surplus and an increase in profits sent overseas. Foreign investment has accelerated in Brazil as the central bank has built up credibility by beating its inflation target for two straight years at the same time that Latin America's biggest economy is expanding at the fastest pace since 2004. The central bank's inflation target was first adopted in 1999. The bank now targets inflation of 4.5%, plus or minus 2 percentage points to account for unexpected price shocks.