Monday, August 30, 2010

Global Companies Investing Heavily in Brazil - With Brazilian Loans as Global Finances Still in Disarray

Global multinationals continue to invest heavily in Brazil. However, the capital for investment is coming from Brazil since these companies still have trouble accessing capital.

Global financial difficulties in external markets still complicate the life of multinational. They are relying more and more on Banco Nacional de Desenvolvimento Economico e Social (BNDES).

The downside for Brazil is that they are bringing in fewer dollars for the country to finance its projects. The BNDES loans to enterprises with foreign capital have doubled from $ 9.8 billion in 2007 to $ 20.4 billion in 2009, according to information provided by the bank. Between January and July this year, the disbursements were for multinational companies were $ 8.6 billion.

BNDES said that the law does not permit discrimination between national companies and foreign companies installed in Brazil. Multinationals, however, received no special treatment. The participation of these companies in the portfolio of the bank remained between 15% and 16% in the last three years. From January to July, it is 12%.

Economists believe that the significant growth of BNDES guaranteed investments contribute to increase the supply of products and to control inflation. But it has a side effect, which is to reduce the entry of foreign productive investment.

Projections by the Central Bank, foreign direct investment will not cover the Brazilian external deficit on current account for the first time since 2001. The central bank estimates $ 49 billion deficit and a net inflow of direct foreign investment of U.S. $ 38 billion. This means that the country will depend on the input of at least $ 11 billion in equity and fixed income to balance its accounts.

Nothing to worry for now, given the magnitude of speculative capital that Brazil has been attracting. The information is from the newspaper O Estado de S. Paulo.

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