Publish in Trade Talk - Wednesday, May 4, 2016
Brazilian president Dilma Rousseff is expected to be impeached, and replaced by more business-friendly Vice President Michel Temer starting next week. (Photo: Roberto Stuckert Filho/PR)
Brazil and Mexico fall significantly on the latest FDI confidence index.
BY LATINVEX STAFFF
Thanks to its economic and political crisis, Brazil no longer ranks among the top ten destinations for foreign investors, according to the latest A.T. Kearney FDI Confidence Index.
“After more than five years in the top 10 of the FDI Confidence Index, Brazil drops significantly in the rankings… likely because of the country’s worst recession in more than two decades,” A.T. Kearney says. “Investors may also be concerned about Brazil’s business environment, in the wake of ongoing corruption scandals and record-low consumer confidence.”
Brazil fell from sixth place in 2015 to 12th place in 2016. In 2014, it held the fifth spot on the index, which tracks forward-looking global investment sentiment from senior business executives in companies with global revenues of $500 million or higher.
“Greenfield FDI has been falling at alarming rates since its peak in 2011, when more than 500 projects valued at a total of $50 billion were started,” A.T. Kearney says. “In more recent years, the number of projects dropped from 117 in the first quarter of 2014 to just 56 during the same period in 2015.”
Brazilian President Dilma Rousseff is expected to be impeached by the country’s lawmakers. The Senate is scheduled on May 11 to vote in favor of impeachment, leading to her temporary ouster during a trial that could last up to three months.
Vice President Michel Temer would then assume the presidency and is expected to quickly implement several pro-business measures, including allowing more foreign ownership of key sectors (including aviation), privatizing state companies, and implementing labor and pension reforms.
He will also appoint Henrique Meirelles, a well-respected former central bank governor and longtime BankBoston executive, as finance minister.
While it may be no surprise that foreign investors are sluggish on Brazil, the survey shows that they are also less upbeat on Mexico.
Mexico fell nine spots -- from 9th to 18th place, its lowest ranking in the Index since 2012. That comes after the country made gains in last year’s survey, moving up three spots.
Despite recent reforms opening up Mexico’s economy – including its energy and telecommunications sectors -- FDI has been falling in recent years, declining to an estimated $29 billion in 2015 after peaking at $45 billion in 2013, A. T Kearney says.
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