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Why Investment in Brazil is becoming so popular


Brazil is a huge country. With an area of 8.5 Million square Kilometres and a population of over 200 million people, the country is the world’s fifth largest on both counts.

As a result of its impressive growth in recent years, Brazil has the largest economy in Latin America, the second largest in the western hemisphere and the sixth largest in the world (in fact, at the end of last year it overtook the United Kingdom in terms of national GDP). As a result, Brazil is widely seen as one of the globe’s up-and-coming nations. Indeed, it’s a leading player in the BRICS association of countries (Brazil, Russia, India, China, South Africa), a group of states earmarked as moving towards economic prominence (if not actual dominance) as the century progresses.

Internally, too, there’s been a steady transformation in the lives of the people.

In the last couple of decades, for instance, persistent action by Brazil’s governments has done much to reduce poverty and increase educational and employment opportunities for its citizens. This is very much a feature of the current administration led by President Dilma Rousseff, building on the achievements of the famous ‘Lula’ and several other notable predecessors.

Of course, poverty and poor life chances do still exist but to a much lesser extent than before, and they continue to reduce, slowly but surely. It’s heartening that recent statistics show that for the first time ever (and probably unique in third-world terms), the so-called ‘middle class’ are now an absolute majority, 52% of the population.

Brazil has been working hard to develop its economy and infrastructure.

To do so involves financial investment of different kinds, public sector, private sector and from overseas. As regards these the coalition government has sponsored or encouraged a number of interesting initiatives, often involving co-operation between the various sectors.

These public/private partnerships are known in other parts of the world, too, and take many different forms. In Brazil, perhaps the most successful example is the so-called ‘Minha Casa Minha Vida’ affordable housing programme. This is a new idea in this country and is having a transforming effect on society.

Under this programme, and for the very first time, millions of ordinary citizens of relatively modest means are able to buy (with affordable mortgages) homes of their own. Private investment fuels the government-backed scheme, with high returns already being received by initial investors.

This is just one of the novel approaches encouraged by recent governments and it is running in tandem with other broader improvements. These include public education, health and sanitation as well as industrial and agricultural initiatives.

Brazil is rapidly becoming not just a developing economy but an ‘almost developed’ one.

Internal / Domestic

Investment in Brazil (as in most other countries) consists of two main types, the domestic and the foreign. Either of them can involve either private or public-sector finance of course and in some cases a mixture of the two.

Results can be very varied and the picture is highly complex, with many Brazilian companies ‘going global’ and many foreign-based corporations operating in the country. Also, this leading BRICS nation is a member of many different international organisations

However, the national conditions of the country and the government’s direction of investment have themselves brought about tremendous changes in the country in recent years. Although the process was started before, the present coalition Government and its immediate predecessor have managed a dramatic transformation in the lives of the people. They’ve done this by managing a difficult set of conditions in a complicated balancing act, seeking to control interest rates, inflation and GDP together with housing, educational and health initiatives.

Currently, the basic ‘Selic’ rate of interest is slowly inching down, heading for single figures. Inflation is at 6.5 % and GDP growth is at 3% per year. Other facts include the country’s very important achievement of oil self-sufficiency this decade. In addition, the increased stability brought about by the historically new(-ish) currency, the Real has further improved the economic climate since its introduction in 1994. As for the balance of payments, Exports now comfortably exceed imports and the four biggest overseas markets are China, the USA, Argentina and Germany, in that order and together accounting for 42% of all exports.

All these features create a favourable background for people wishing to invest in Brazil, especially in the main industries ; iron and steel, oil, coal, aircraft manufacturing and textiles of all kinds. Property is an up-and-coming field too, which will feature in an article later in this series.

One must also pay close attention to the 20% of the workforce who are employed in agriculture. This is a multi-million Real expanding sector with more than its share of recent controversy. These are centred on GMO’s (Genetically Modified Organisms), increasingly employed to boost yields and make crops more durable…but at too great a cost to environmental safety, some would say.

Investments are made by governments, companies and individuals for a mixture of reasons. While it seems obvious that seeking the best and the fastest profitable returns is a prime motivator, there are other purposes such as the perceived ‘social good’ of a particular enterprise.

In Brazil these days this is certainly true of the public sector projects of course but perhaps surprisingly, also of some of the infrastructure improving projects such as those to do with renewable energy. This includes bio-fuels such as ethanol but also, modest so far but increasing, wind power. Hydro was significant previously (and still is to some extent) but has proved susceptible to drought lowering river and dam levels. This led to a determined move to diversify to other renewable sources. The outcome is that a clear majority of the energy produced in Brazil today is from these non-carbon origins.

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