Brazil gets FDI boost as budget cuts praised
Foreign investment in Brazil has increased this year, according to data from the Brazilian government which has reined in its spending plans
Foreign direct investment into Brazil could be poised for a
rebound this year following a dip in 2013, data released this
week shows. The country attracted $5.1bn worth of FDI in
January and net portfolio inflows of $2.7bn, according to data
from Goldman Sachs.
The news follows the government's announcement this week of
plans to freeze BRL44bn ($18.7bn) in spending, a move that was
widely praised by analysts who said the administration was now
targeting a more realistic primary surplus.
FDI into the country beat the $3.7bn posted in January 2013,
finance minister Guido Mantega said on a call with analysts
and reporters on Friday. That could signal a rebound in direct
investment, he said.
Brazilian FDI reached a $66.7bn high in 2011, but slipped in
the following two years, coming in at $64bn last year. Analysts
at Bradesco have forecast just $50bn of FDI this year.
The data came after the government adjusted 2014 spending
and revised down its forecast for a primary budget surplus to
1.9%, from 2.1%. The move was praised by analysts, although
they cautioned that execution of the plan would need to be
"The spending freezes announced by the Brazilian authorities
are a step in the right direction and highlight that the
government is seeking to better anchor expectations on fiscal
policy," Shelly Shetty, head of LatAm sovereigns for Fitch,
said in a statement on Thursday.
"The budget target is based on a more realistic, although
slightly optimistic GDP growth projection for 2014. The
expected reliance on non-recurrent revenue to achieve the
target has been reduced from last year. All this implies that
the government is willing to make some fiscal adjustments amid
an election cycle," Shetty said.
The new primary surplus target was a "very reachable, very
reasonable" one, in the view of analysts at Bulltick Research,
who said it broke a cycle of "lofty targets" that the country
had missed in previous years.
Analysts at Itau said the budget revision offered "signs of
goodwill" on Brazil's fiscal dynamics.
The bank nevertheless expects the government's revenues to
be lower than budgeted and expects a primary balance of 1.3%.