Brazilian state expects FDI flood
Brazilian officials see faster growth and a continued flow of foreign direct investment
Foreign investment is set to continue to flood into Brazil despite the countrys sharp economic slowdown last year, leading officials told Emerging Markets yesterday.
Sergio Gabrielli, secretary of planning for the state of Bahia, the most important state economically in the countrys northeast, said investments oriented to the domestic market would drive growth.
This is one of the best moments in our history. We have very big investments, he said. Bahia state has amassed a portfolio of more than $35 billion of private investment especially in mining, wind power and paper and pulp through to 2015. We do not see a reduction in the willingness of investors to put money in, said Gabrielli, who is also a former president of oil giant Petrobras.
Government investments add $10 billion to the $35 billion and the overall total of $45 billion compares with the states GDP of less than $100 billion, Gabrielli said. He admitted the flexible exchange rate had hurt Brazilian companies but insists it was not deterring foreign investors. Currency appreciation comes as a result of our success, the growth of the Brazilian economy and inflows, he said.
Jacques Wagner, governor of the state of Bahia, said there had been no slowdown in investor interest, adding: We are still being sought out extensively by investors. He noted that the states GDP growth had been three to four times the national average.
Bahia has installed one of the largest wind park farms in Latin America, is seeing vehicle production increase, and receiving greater interest in soy and its processing. He pointed to Chinese investments, a 20% increase in investments by Ford, a fourfold increase in investments by Nestlé and the emergence of the state as a centre for beer production, with Schincariol and Itaipava sinking investments into production.
One of the biggest concerns we have regards the federal taxation system as it relates to states, a theme which is still being debated, he said.
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Belchior attributed a large part of last years inflation to a food price shock, which she said was unrelated to economic performance. Stripping that out, inflation would have been 4.6%. The market is predicting a fall in inflation this year and next year and we expect inflation to fall to the middle of the band at 4.5%, she said.
Various indicators are improving. Brazil will see 3-4% growth this year according to various independent economists and the government is opening participation from the private sector in the countrys investments.
Belchior said the main challenge was competitiveness. We have attacked this problem in addressing the quality of our workforce and through a programme of professional training, as well as more spending on science and innovation, she said.
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