Brazil Host to a Growing Number of Multinational Companies

 Ever since the start of the 21st century, more and more Brazilian businesses have been going global. Their international plan used to only include exports, but now they are also investing in other countries. These companies are now focusing on South American countries that are close by. At first, this trend helped Argentina, but now it's also helping Chile, Colombia, and Peru, which are all part of the Pacific Alliance. Foreign direct investment (FDI) was shaped by two things in the 20th century: the large amount of FDI that flowed between developed countries, and 2) the fact that developing countries were mainly the recipients of FDI. Things have been changing a lot in this area since the start of the 21st century. After the financial crisis of 2008, the amount of FDI going to developing countries rose from 29.4% of all FDI incoming in 2007 to 53.6% in 2013. A lot of this change can be explained by the fact that FDI flows into rich countries have dropped sharply since the crisis.

Only 43% of all the flows that happened in 2007 were seen in 2013

However, poor countries are also important in this situation because the amount of money going to them has grown: in 2013, they received 32% more than they did before the crisis (2007). The other side is that developing countries also became places where FDI left. In 2013, developing countries sent out almost a third of the world's FDI. In 2005, that number was only 15%. This growth was helped by both private and public big business groups from developing countries. Brazilian businesses are a part of the change that is making the world a better place to trade. In the past, Brazil has gotten a lot of foreign direct investment (FDI). Recently, it has been getting close to US$60 billion a year. The large amount of FDI coming in shows that Brazil has helped make emerging countries more appealing as places to invest FDI. We shouldn't make this event seem bigger than it is by comparing outflows from Brazil to those from other developing countries. Even when it comes to developing economies, Brazil is still a small player when it comes to FDI leaving the country. China, India, and even smaller economies like Turkey make the country less important than it is. It was only US$4.2 billion in net FDI that left Brazil from 2010 to 2013. This was a lot less than other developing countries like India ($38 billion), South Africa ($8.2 billion), Turkey ($10.9 billion), and Malaysia ($59.3 billion). In the same time period, China sent an amazing US$312 billion in FDI out of the country. Several things could be to blame for this poor result. Some of these are Brazil's historically protectionism in trade and industry policies, which is still strong, and public policies that make it less likely for production to move to other countries, like the way Brazilian companies' profits are taxed. Even with these problems, close to 100 Brazilian companies from a range of industries began the process of going global.

Some have come a long way in this direction and are now found in more than a dozen countries

Even though there aren't many of them, big Brazilian companies are doing a lot of business in South America. After South American countries, including Brazil, got through the "lost decade" of the 1980s, stabilized their economies, and started economic integration projects, Brazil's exports to nearby countries grew a lot. This was made possible by the creation of Mercosur. An interesting fact is that Brazil mostly sends industrial goods to the region. This is different from the past, when the country mostly sent agriculture and mining goods around the world. In the past few years, this good situation in the area started to change. Argentina is in the middle of a long economic crisis. It is Brazil's main partner in Mercosur and its biggest market in the area. There are now more trade deals between Andean countries and places outside of the area. These include deals with the US, the EU, and China. Trade preferences that helped Brazil in the markets of the region are slowly going away, and Brazilian produced goods are no longer competitive in those markets. Before Brazil's exports to South America started to suffer from these problems, big companies that have been shipping goods for a long time started investing more in the area. South America was the best place for most Brazilian businesses that wanted to expand their production to other countries to set up their first subsidiary. In 2014, 52% of Brazilian multinational businesses in a ranking by Fundação Dom Cabral2 said they wanted to invest in their first subsidiary abroad in South America. North America came in second, with 33.3% of those companies saying they wanted to invest in North America. The National Confederation of Industry of Brazil put out a study in 2007 that said Argentina and Chile were the two best places for Brazilian companies to invest in the first few years of the century. In the case of Argentina, the study said that Brazil's main reasons for investing there were the country's strong economic recovery from the 2001–2002 crisis and the potential of its home market, which has a lot of middle-class consumers. Brazil sent companies to Chile to do business because of "the friendly regulatory environment and the discipline and stability of rules the country offers," according to the study.

As Brazil invested in more places in the area, it became more interested in natural resources and getting access to the domestic markets of South American countries

When it comes to consumer and intermediate goods, most Brazilian investment is made by buying up local businesses and brands. More and more "greenfield" projects are being done in the area of natural resources. The international financial crisis caused a credit crunch, which changed the way Brazilians invested in South America. Poor economic growth in the region, which hit its lowest point in 2009, also had an effect. Since 2010, though, Brazilian investments in South America have been going up again. Three countries benefited from these investments: Peru, Colombia, and Argentina. In Argentina's case, some businesses put money into the market to keep getting into it even though the government was putting more and more trade restrictions in place. For these businesses, investing became a way to get around the tariffs and other hurdles that the Argentine government was putting up more and more. In the mines and meat production industries, other businesses also wanted to get their hands on natural resources. But it was clear that Peru was the best at that time: two of the three biggest investments made by Brazilian companies in the region after the crisis went to Peru. The first one came from Vale do Rio Doce and was worth US$566 million. The second one came from Votorantim and was worth $100 million. Both purchases had to do with using energy and natural resources.