Letter IEDI n. 870–Good presence of Brazil in the FDI ranking
2017 was not very beneficial to Foreign Direct Investment (FDI) in the world, according to the report on global investments of the United Nations Conference on Trade and Development (UNCTAD). International flows fell sharply: -23% compared to 2016, from US$ 1.87 trillion to US$ 1.43 trillion, due to the significant contractions in the US and Europe. However, this scenario should not be repeated in 2018, according to UNCTAD's estimates, with a rise of up to 10% in global flows being expected.
Regarding FDI attraction, Brazil was a champion in 2017, climbing three positions in the international ranking of foreign direct investment inflows, from seventh to fourth place. With a 8.1% growth rate between 2016 (US$ 58 billion) and 2017 (US$ 63 billion), Brazil was only behind the United States, China (a record US$ 136 billion inflow) and Hong Kong.
In fact, the US kept the leadership even with a 40% drop in inward flows, which amounted to US$ 466 billion in 2016 and US$ 275 billion in 2017. This strong decline appears to have prompted the Trump administration to play a more active foreign policy role, seeking new deals in 2018.
Regarding Brazil, the attraction of FDI corresponded to more than 40% of total flows to Latin America in 2017, with nine of the ten largest company acquisitions by foreigners in the region happening in the country.
Among the activities receiving these investments in Brazil, it is worth mentioning the energy sector, where the volume of FDI more than tripled in 2017, jumping to US$ 12.6 billion. Inflows to the transportation and storage sector quadrupled to US$ 6.6 billion. In manufacturing, FDI flows into chemicals and food products doubled, reaching US$ 3.2 billion and US$ 2.6 billion, respectively, while in the metallurgical sector the increase was 45%, to US$ 3.1 billion.
According to UNCTAD's survey, in 2007 Brazil's attraction of FDI helped increase the share of developing countries in total FDI inflows, jumping from 36% in 2016 to 43%. In this group of countries, FDI flows to Asia maintained a preponderant share of 70%, but remained stable in relation to 2016 with a value of US$ 476 billion. Africa and Southeast Europe, and the Commonwealth of Independent States received lower volumes of foreign investment in 2017: -21% and -27%, respectively. Latin America and the Caribbean saw an 8% increase (US$ 151 billion, or 23% of the total), driven by Brazil.
Considering FDI originators, the group of developed countries, which traditionally consists of the main source of FDI (71% of the total), registered a 3% fall compared to 2016, reaching US$ 1 trillion in 2017. The slowdown was even more intense in the group of developing countries, whose FDI outflow (US$ 381 billion) was 6% lower. In particular, the FDI of European Multinational Enterprises fell by 21%, mainly due to companies in Switzerland and the Netherlands.
In the ranking of FDI outbound flows, the US remained the leader in 2017, Japan moved up from 4th to 2nd position, and China ranked 3rd, due to outflows restriction policies that led to a 36% drop in investments abroad (its first negative change since 2003).
Brazil continued to be out of the ranking of FDI outflow leaders, with flows still negative at around US$ 1.4 billion in 2017. Although foreign affiliates in Brazil have significantly reduced the volume of intra-firm loans, capital outflows continue to derive from withdrawals associated with the economic and political crisis.