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Posts Tagged ‘stability’

The flow of direct foreign investments in Brazil has already surpassed the figure foreseen by the Brazilian Central Bank for the whole of 2008. According to the Central Bank, the total value of foreign investments in the country were US$ 37,1 billion, well above the predicted figure of US$ 35 billion.

The value refers to direct investments done by foreign organizations buying Brazilian companies or investing into the expansion of production capabilities of firms already settled in the country. The Central Bank estimates that, in total, multinational corporations have up to US$ 370 billion already invested in the South American country.

The flow of investment occurred by now is also superior to the US$ 34,6 billion reported in 2007, until then, the highest result since the Central Bank began registering investments in 1947. Central Bank’s Economic Department Chief, Altamir Lopes, says that as oppose to stock market investors, direct investments have long-term objectives, which explains the positive results achieved even during a critical period in the world economy.

“Direct foreign investments are long term resources that keep flowing in a satisfactory way. This is a consequence of a overall perception that the Brazilian economy has solid foundations”, said Mr Lopes.

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Excellente article from the Financial Times:

At Fábio Marangoni’s printing works in São Paulo, pages of glossy magazines emerge almost silently from modern printing presses imported from Germany.

Asked how much he borrowed to install the presses, Mr Marangoni replies with an air of self-satisfaction.

“Nothing,” he says. “We used our own capital.” His family-owned business will be 50 years old next year. “During that time we’ve seen the currency go wildly up and down. Our raw materials and machinery are priced in dollars, so we’ve always taken care to use our own money. It means we have grown more slowly than otherwise. But it’s worth it. Look what’s happening now.”

Mr Marangoni’s caution has not shielded him entirely from the chaos in the world’s financial system. Credit conditions have tightened and consumers and businesses are putting spending plans on hold.

Nevertheless, Brazil should emerge relatively unscathed. Economists who previously expected growth of between 4.5 and 5.5 per cent next year now expect between 2.5 and 3.5 per cent – by no means bad compared with the global outlook.

Not all companies have been as conservative as Mr Marangoni’s. Grupo Votorantim, an industrial conglomerate, said on Friday it had paid R$2.2bn ($958m) to liquidate positions in currency derivatives. It was the third large company to announce big losses on currency bets and is unlikely to be the last.

Local media are talking of “the Brazilian subprime”. Some observers expect to see bankruptcies as more exporters are forced to admit that they exposed themselves beyond sensible limits to currency contracts that worked in their favour during the real’s long rally from R$3.95 to the US dollar in October 2002 to R$1.56 in May this year but which turned against them during its subsequent fall.

On the whole, however, Brazilian companies are much less indebted than their foreign competitors. The total amount of credit in Brazil was equal to 38 per cent of gross domestic product in August, much less than in many developed countries. where credit reaches multiples of GDP.

Economists and business leaders have long been calling on the government to enact spending reforms to release more money to finance investment and consumption through credit. There has indeed been a consumer-led acceleration of growth in the past few years, as lower interest rates, rising employment and enduring economic stability have encouraged borrowing.

Read the article in full here.

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