FOREIGN INVESTMENTS IN BRAZIL 2019 – HIGHLIGHTS
Reform of Social Security
Only with the approval of the Social Security reform, Brazil can attract between US$ 50 billion and US$ 100 billion next year for the Stock Exchange and another US$ 80 billion of foreign direct investment.
Global funds dedicated to emerging markets have substantially reduced exposure to the country and now the foreign investor is waiting for this new government’s communication on reforms, he is more skeptical, waiting for things to happen
We have some scenarios: a rapid and deep reform, which would be the best of all worlds, and a reform in stages throughout the year. If there is clear communication of the depth of the reform, how it will be implemented and its timing, implementation need not be one way. If it is in stages, as long as it is communicated, it would not be so problematic. Tax reform, policy and the maintenance of the “spending ceiling” are equally important. Our baseline scenario is an approval of the Social Security Reform in stages.
Expectation regarding the First Year of Government of President Jair Bolsonaro
There is a lot of optimism about Brazil’s outlook. This optimism is directly aligned with the new government’s ability to approve the reforms. The earlier and deeper the reforms, the greater the level of confidence and the attractiveness of investment, whether local or foreign. The level of business confidence has increased.
Projects that had been paralyzed “returned to the table”. We see a high expectation that Brazil will recover faster than expected because inflation is under control, interest rates are historically low and idle capacity is high. These three elements make it possible to turn the economy very quickly without much short-term investment.
Increase in the Flow of Foreign Resources in Brazil
There are global funds dedicated to emerging markets sub-allocated in Brazil. Direct foreign investment can add up to more than US$ 80 billion, up from US$ 70 billion in 2018. In terms of portfolio investors, we can attract billions, ranging from US$ 50 billion to US$ 100 billion, depending on the scenarios.