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Foreign Investment Grows in Brazil But Decline Is Expected in 2009

Foreign investment in Brazil The amount of foreign direct investment (FDI) entering Brazil remains high this year. According to figures supplied by the Brazilian Central Bank for September, up until Tuesday, September 23, inflow has totaled US$ 5.250 billion, and the volume expected for the whole month is US$ 5.8 billion.

In 2009, however, investment should decrease, whereas the deficit on current transactions should rise.

According to the head at the Economics Department at the Central Bank, Altamir Lopes, expansion of FDI in the country, even amidst the international crisis, is taking place because the Brazilian economy is "in order." "Our macroeconomic indicators are quite stable," he asserted.

He also mentioned the "investment grade" granted to the country by credit rating agencies, and stated that in the midst of the current crisis situation, Brazil represents an option for investors.

The Central Bank has maintained its FDI projection for this year at US$ 35 billion, but estimates a lower figure for 2009: US$ 33 billion. "The capital flows should retract a little, obviously a reflection of the crisis," he said.

In the accumulated result for the year, FDI totals to US$ 24.575 billion. Sectors that received the bulk of investment in Brazil were those of automobiles, metallurgy, and financial services. These sectors combined answer to 50.2%.

"The sectors that receive the most capital are the ones that remit the most [funds to foreign countries]," stated Lopes. In August, FDI totaled to US$ 4.633 billion.

To Lopes, FDI is going to finance the current account deficit (negative result for all operations between Brazil and foreign countries). The Central Bank projects a current account deficit of US$ 28.8 billion this year and US$ 33.1 billion in 2009.

Lopes is not worried about the prospect of an increase. He called attention to the fact that the deficit is going to answer to 1.8% of the Gross Domestic Product (GDP) in 2008 and 1.9% next year, rates much lower than the historical average of 2.4%, according to him.

ABr

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