Foreign investment in Brazil doubled in 2022 and reached the highest level in 22 years

Foreign investment in Brazil’s productive sector almost doubled in 2022, reaching the highest absolute value (in dollars) in the last ten years.

In comparison with the size of the Brazilian economy, the contributions reached the highest level in 22 years.

According to the report on the foreign sector published this Thursday (26) by the Central Bank, the balance of Direct Investment in the Country (IDP) was US$90.6 billion last year, 95% higher than the balance in 2021 (US$46.4 billion).

This is the best nominal result since 2012 when investments totaled US$92.6 billion.

All values are “net”, that is, they already exclude capital outflows.

Foreign investment easily exceeded the expectations of the Central Bank itself – which, at the end of September, had revised its IDP estimate for the year from US$55 billion to US$70 billion.

The result was also above market projections, which at the end of December pointed to a little less than US$82 billion, according to the median expectations of economists consulted weekly by the Central Bank.

For 2023, the midpoint of the projections is US$80 billion.

According to the Central Bank, the 2022 IDP balance is equivalent to 4.76% of the Brazilian GDP in dollars, against 2.82% of the GDP in 2021.

The level reached last year is the highest since 2000 when foreign investment in the productive sector corresponded to 5.03% of the GDP.

The Central Bank’s data, in particular the ratio of IDP to GDP, are still subject to revision. The official result of the Brazilian GDP in 2022 will be released by IBGE only in early March.

According to the CB statement, the increase in direct investment in 2022 resulted from the following factors:

• reinvested earnings increased by US$16 billion compared to 2021, reaching US$32.9 billion in 2022;
• equity investments (excluding reinvested earnings) were US$6.6 billion higher, reaching US$36.6 billion); and
• intercompany transactions increased by US$21.5 billion, to US$21.1 billion (in 2021, the balance of these transactions had been negative).

The result of the IDP was more than enough to cover the country’s current account deficit, which increased to US$55.7 billion in 2022 (2.92% of GDP), from US$46.4 billion (2.81% of GDP) in the previous year.

According to the Central Bank, the growth in the external deficit is due to higher deficits in services and primary income, partially offset by an increase in the trade surplus.

With information from Gazeta do Povo