In a nutshell, it may not be the best time to invest in Brazil.
According to Fox News Latino, for the first time since 2002, foreign investors are the backbone of Brazil’s emerging economy, beating out domestic investors, who now only account for 49 percent of acquisitions and capital increases.
Foreign investors, who now control 51 percent of the Brazilian economy, are expected to grow to 55 percent in 2016. Rogerio Gollo, a senior partner at PwC Brazil, said “Foreigners are going to remain interested in Brazil while domestic companies will continue to have financing difficulties.”
CNN Money also noted that the economy has unraveled in the past year, with unemployment up and inflation soaring.
These difficulties are even more troubling after domestic investors reduced their stakes due to the worsening political crisis in Brazil, which led to the impeachment of former President Dilma Rousseff.
With a total of 672 acquisitions that took place in Brazil last year, foreign investors account to more than half. In 2016, it is expected some sectors will get more out of the said investments. Among those likely to attract foreign financing, include information technology, trade, agri business, and even renewable energies.
Brazil’s economy is said to be the largest in Latin America, but the International Monetary Fund said that Brazil’s economy will shrink for the second year in a row, with the unraveling economy coming at the heels of plummeting investments.
Another factor in Brazil’s downturn includes falling commodity prices. With the country’s economic growth relying on commodities like oil, soy, and coffee, it is expected that Brazil will come crashing down.
However, despite CNN saying that foreign investors are fleeing the nation, it appears that more of them are still willing to take the risk compared to domestic companies.
Brazilians are also starting to feel the impact of their economic downturn. As noted by the Chicago Tribune, while citizens are still leaving malls with shopping bags in hand, but they have considerable cheaper products in hand compared to the previous years. This is due to the steady rise in unemployment, and the fact that consumer credit has been drying up.
With Brazil’s large population and high consumer power, it is not unusual that companies are still investing. Chief economist at Rosenberg Consultores Associados Thais Zara said, “We are talking about a deceleration, not a total halt of sales.”
She added, “We have 200 million inhabitants and a high consumer power. It is a very attractive market, even if you have in the short-term one or two years of negative growth.”