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Steady growth in Brazil brings in more foreign direct investment

by Takashi Kitazume

Staff Writer

Despite the recent economic slowdown, Brazil continues to attract steady foreign direct investments (FDI), and Japanese firms are advised to consider the medium- to longer-term importance of the Latin American market and competition with Chinese and South Korean rivals when making business decisions, said participants in a recent seminar in Tokyo.

Brazil’s Ambassador to Japan Marcos Bezerra Abbott Galvao and Yasushi Ninomiya, assistant director of the Latin American division at Japan External Trade Organization’s Overseas Research Department, were speaking at the Oct. 24 seminar organized by the Keizai Koho Center.

In his overview of the Brazilian economy, Ambassador Galvao explained how the sustained growth in recent years has moved a significant share of the low-income group into the middle class. Its growth is the slowest among the BRICS (Brazil, Russia, India, China, South Africa) emerging powers, and GDP growth this year is estimated to be 1.5 percent, he noted.

Brazil-Japan trade has meanwhile continued to increase, with Japan now the fifth largest importer from Brazil and seventh largest exporter to the country, he said.

According to Ninomiya, Japan was the fourth-largest in terms of FDI in Brazil in 2011, accounting for 11 percent of the total. The sharp increase last year was attributed to major projects including Kirin Holdings Co.’s $2.2 billion takeover of a local brewery.

FDI into Brazil remains on a steady uptrend and increased 40 percent in 2011 from the previous year, he said. The amount of FDI was roughly half that went to China and double that was poured into India in the same year, he noted.

While Japanese investments have traditionally focused on manufacturing and natural resources sectors, recent moves by firms such as Rakuten, Zensho and H.I.S. reflect a growing interest in the growing service sectors in the country, he said.

Ninomiya said Japanese firms investing in the country should have a good grasp of the Brazilian government’s policy directions because it is a nation where the state continues to play a major role in the economy. The policies introduced in 2011 to boost domestic production, for example, raise the hurdles to vehicle imports and favor investments that help local industries move up the value chain, he noted.