Historically, FDI flows have not contributed greatly to GDP or to overall investment in the Brazilian economy. In recent years (1996-1998) there has been a significant change. It is estimated that in 1998 the ratio of FDI to GDP will reach 2.5% and that of FDI to gross fixed capital formation (GFCF) will be about 13%. These ratios are at record levels for the Brazilian economy in the recent past. They are largely due to privatizations, which accounted for 28% of Brazil¡¯s total FDI inflows in 1996 and 1998. Although the privatizations process will continue in 1999-2000 with banks owned by the states, new telecommunications concessions, oil companies (Petrobras) and others (including the privatization of the Banco do Brasil, Latin America¡¯s biggest bank), this exceptional upward trend in the FDI/GDP and FDI/GFCF ratios is likely to end at some point in the near future.
During the period 1996-1998 (or 1996-1999) Brazil may be repeating the A
The FDI benefits for Brazil generally come in three different forms:
On the one hand, the massive arrival of foreign investors ¡ªthrough the purchase of existing assets¡ª could have positive effects in terms of modernization and improvement of services, with the consequent positive impact on the country¡¯s systemic competitiveness. Moreover, new patterns of competition could encourage transnational corporations in the manufacturing sector to integrate Brazil more actively into their international production networks. Lastly, the considerable size of the internal market (strengthened by Mercosur) and the improved economic outlook should continue to attract international investors to Brazil.
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