Brazil’s economy and exchange traded fund (ETF) only continue to get stronger. For that reason, it’s no real surprise that the country is now increasingly looking overseas for other investment opportunities to boost the prospects of its companies at home.
The idea of Brazilian companies going international is a phenomenon that really only gathered steam this decade.
According to Luis Afonso Lima and Octavio de Barros f0r Latin Business Chronicle, from 2000 to 2003, outward foreign direct investment (OFDI) averaged $0.7 billion a year. Over the four-year period 2004-2008, this average jumped to nearly $14 billion. In 2008 alone, OFDI jumped to $7 billion.
Recent data shows about 887 Brazilian companies have invested overseas, and foreign direct investment may only grow as the global economy improves. Today, Brazilian OFDI can be found in 78 countries.
The internationalization of Brazilian companies is dominated by the private sector, although state-owned enterprises also play a role. Petrobas is a good example; the company has expanded overseas in 15 countries on three continents.
Reasons for more Brazilian companies to move abroad include:
- The companies are following clients into international markets
- These companies are defending their competitive position, monitoring the competition in international markets, meeting international demand and reducing their dependence on a single (domestic) market
- Companies are looking for more natural resources, lower costs, better infrastructure and better incentives than they can find at home
- OFDI stimulates exports
- It improves the competitiveness of companies in Brazil
- iShares MSCI Brazil Index (EWZ): up 76.3% year-to-date; Petrobras is 11.6%
For more stories about Brazil, visit our Brazil category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.