China and India are expected to draw most of it, while Brazil dispute investor interest with the other two members of the group, Russia and South Africa.
The resources that fall into this category are those applied in productive activities, creations, mergers and acquisitions and loans between headquarters and branch offices. And, according to experts consulted by BBC Brazil, can play an important role in the task of taking the country out of crisis.
They explain that there are several ways to encourage the resumption of growth, including the increase of exports, domestic consumption, public spending and, finally, direct foreign investment.
This last option, they evaluate, would be the most promising for the country given the current economic context.
In the case of exports, they generate capital input when the positive balance in the trade balance is positive – that is, when there are more exports than imports.
The problem is that the country is a major seller of minerals and agricultural goods (so-called commodities), which currently record low prices. Moreover, as noted by Professor Eduardo Gomez, an expert in international development and emerging economies of King’s College, London, China’s economy, the main buyer goes through deceleration process.
Another possibility, the creation of jobs through public investment in major infrastructure projects, seems distant, since the government of President Michel Temer has given signs that will strive to stop the advance of public accounts.
But the director of Latin America at Moody’s rating agency, Alfredo Coutino, betting on management makes sense – and may in the end help the country return to growth.
“The government promised and showed willingness to return to macroeconomic discipline, which is a key element for the recovery of market confidence. If this materializes, it would not be a surprise to see Brazil resume positive growth in 2017,” he said.
One of the flagships of the PT years, encouraging consumption – especially the middle class – generates demand of the productive sector, heating the economy. With the advancement of debt ratios and unemployment, however, it does not seem a viable option today.
“At the present time in Brazil, all the ingredients for development are virtually missing. I do not see government spending, I do not see exports, I do not see consumption. But I do not think we should be predominantly pessimistic,” said Gomez.
“Investors are wise and are realizing that might be a good time to invest, buy cheap, as Brazil goes through ups and downs of cycles,” he says.
Foreign investments are important because they allow the increase in national production capacity. This, in most cases, requires the assembly plants and offices, which generates assets and jobs.
That is, different from the speculative capital, which enters through the stock exchange and is volatile. Also, Direct foreign investment can not “escape” the country quickly which, according to experts, results in tangible benefits for local development in the medium and long term.
Applications in BRICS
Together, the five countries BRICS (Brazil, Russia, India, China and South Africa) account for 41% of world population and nearly a quarter (23%) of global wealth. They received 15% of direct global investments in 2015.
Brazil, however, is seen as one of the economies most seemingly unpredictable of the block.
But Astrit Sulstarova, head of UNCTAD’s Investment and Data Trends department, said that despite the difficulties, the country has proven resilient and promising.
The group attached to the UN consulted executives from multinational companies to know where they want to invest in the next two years, and Brazil ranked seventh in the world rankings, between Mexico and Japan. Topping the list are the United States, China and India.
“See, despite the political situation, Brazil is among the top 10. Investors are hungry for short-term trade-offs in developing countries,” said Sulstarova.
The economist argues that a less valued currency will help to attract investment and international companies are eyeing merger and acquisition opportunities in the country.
He cites as an example of “bargain” purchase by British Tobacco, for $ 2.45 billion (R $ 7.89 billion), the operation belonging to Souza Cruz.
“Certainly a depreciated currency is leaving the assets in the most attractive Brazil for investors. It will take a little more time for them to return, particularly to the social and political climate stabilizes, but privatization and deregulation will leave Brazil more attractive. “
In 2015, Brazil received US $ 65 billion in foreign direct investment. In the previous year, the total registered out of $ 73 billion, which on a global comparative left the country in eighth place among the most attractive destinations, according to UNCTAD data released in June.
The latest UNCTAD report states that China and India are in the pack leadership and the macroeconomic trend of Brazil and South Africa is falling in these investments inflow.
In Latin America, the study also points out that the cancellation of Petrobras investments and other oil companies like Pemex (Mexico) and Ecopetrol (Colombia), led to a drop of 86% in capital inflows in the sector in 2015.
On the other hand, Sulstarova team the data show an increase of 80% in mergers and acquisitions in the first half of this year, mainly for operations in Brazil, Chile and Colombia.
In 2015, investments in Latin America and the Caribbean, excluding bank transfers to offshore, totaled $ 168 billion.
On average, the region should follow the same global trend and FDI should back between 10% and 15% this year to between $ 140 billion and $ 160 billion. The largest investments are in the manufacturing of food, drink, information and technology.
The world stage
The causes of the scenario “rather pessimistic”, the report says, are the reduction of consumption in rich countries, the absence of effective policies against tax evasion, poor performance of commodity exporters and the fall in profitability of multinationals.
Geopolitical and regional tensions may amplify the downturn, says the agency.
According to the report, multinational companies would be looking for investment opportunities in the digital economy and in places where the urbanization process is observed, creating new consumer markets.
“We anticipate that FDI (foreign direct investment) will recover in 2017, then to reach $ 1.8 trillion in 2018, but remains lower than the peak pre-crisis (2008),” he said in a statement Secretary general of the organization, Dr. Mukisha Kituyi.