Brazilian States Top List for Foreign Direct Investment: Study

Brazil’s São Paulo has topped the list of fDi’s Latin American States of the Future 2018/2019 for foreign direct investment (FDI). Other Brazilian states Minas Gerais and Paraná were also highlighted as tops for FDI strategy. In the overall rankings, Buenos Aires Autonomous City and Mexico City District took second and third spots.

São Paulo’s win was based on the state ranking first for both business friendliness and economic potential, as well as boasting the highest GDP of all places in the study. São Paulo was also the most attractive state in the region for foreign investors between 2013 and 2017. The study highlighted that the state houses more knowledge-based sectors than any other in the region and also noted the opening of the 3,000-strong contact center facility in Guarulhos by Spain-based call-center operator Atento, in its analysis of the winning state’s performance.

Second place Buenos Aires Autonomous City was praised for the “eagerness of the technical community to be leaders in Latin America and drive innovation”. This reputation for innovation has attracted significant interest with companies like US-based CloudHesive choosing it for new office openings.

Mexico City, ranked third overall, has seen investment from 56 international destination. According to the study, sales, marketing and support operations make up the majority of the business activities from inward investors, together making up more than 40% of all investment in the state over the specified period. Latin American States of the Future 2018/2019 highlighted recent investments from companies such as Airbnb, Bank of America and Microsoft, as well as a rising number of Spanish companies, which together account for 11% of investment.

Brazil’s states fared very well throughout the various categories. Minas Gerais’s foreign direct strategy attracted attention primarily because of investment promotion agency FIEMG and its use of a first-of-its-kind business intelligence system to support investing companies with their business decisions. According to INDI, Minas Gerais’ investment promotion agency, the state has 25 incubators of technology-based companies associated with Rede Mineira de Inovação (RMI), and approximately 159 companies in incubators in the State.

It lists more than 5,000 ICT-related companies in the state, of which 70% are in the Belo Horizonte area. The state is working with public and private entities to encourage the growth of ICT in the region, with programs such as the MGTI 2022 program aimed at training, generating business, adapting the regulatory system and creating a business, technology, information and entrepreneurship cluster.

This survey cements the growth seen across a range of factors in Latin America. 2018 was a bumper year for Latin America in terms of investment. The region surpassed the US$1 billion mark in 2017 and the first half of last year saw it top over US$780 million. Venture capital interest is growing and core geographies like Mexico and Brazil have continued to grow. Colombia (up 36% to US$92 million), Argentina (up 515% to US$38 million), and Chile (up 248% to US$11 million) have all reaped the benefits of growth in investment in 2018. New unicorns have emerged throughout the region.

It is unclear yet how 2019 is shaping up, but there is optimism that there will continue to be large numbers of deals in the region, even if overall value might not reach 2018 levels.

Nearshore Americas’ infographic draws on data from a variety of sources to paint a picture of venture capital and investment in Latin America.

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