Brazil’s Economy Picks Up Pace, FDI Rises to New High

Despite economies around the world facing slow downs, foreign direct investment (FDI) in Brazil surged to one-and-half year high in July, fully covering the country’s shrinking current account deficit.

In a statement issued Thursday, Brazil’s Central Bank claimed that the economy attracted US$ 8.42 billion in FDI in July, well above the $5.8 billion of June.

FDI flows are an indicator of market confidence in the Brazilian economy, which is one of the attractive emerging markets for global investors. In the last twelve months, ending  July 2012, net FDI inflows totaled US$ 66.3 billion, accounting for 2.77 percent of GDP.

“The current account deficit was $3.766 billion in July, central bank data showed, narrower than the $4.4 billion deficit in June and smaller than the median of market analysts’ expectations,” according to Reuters.

“That gap was fully covered by a surge in foreign direct investment, which falls under the capital account in the balance of payments.”

A survey conducted by UNCTAD showed that the BRIC economies (Brazil, Russia, India and China) have been the most attractive destinations for investors since 2010.

So far this year, Brazil has attracted a total of US$ 38.141 billion in FDI compared to US$ 38.48 billion for the same period in 2011. The Central Bank of Brazil hopes to see FDI totaling at US$ 50 billion by the end of this year.

Brazil has recently unveiled plans to inject $66 billion into the economy to stimulate growth and build roads and railways across the country. There are plans to open up airports and seaports for private sector investment.

The country’s net foreign portfolio investment inflows totaled US$ 1.7 billion in July 2012. In the domestic market, fixed income securities yielded net inflows of US$ 657.0 million through July 2012.

The stock of international reserves reached US$ 376.2 billion in July, a growth of US$ 2.2 billion compared to June 2012. In July, the remuneration of reserve holdings totaled US$ 366 million, while other foreign operations increased international reserve stock holdings by US$ 1.9 billion.