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Investment in Brazil: the electoral challenge
The challenge between Bolsonaro and Lula, was a Indirect challenge between American and Chinese influence in South America.. As Latin America's main economic and geopolitical hub, the two contenders for global hegemony have sought to expand economic clout in the country.
The coexistence of these two major economic powers over the past decade has encouraged investment and growth in South America, although the benefits often ended up solely to the urban bourgeoisie and political-economic elites rather than the lower and middle classes, perpetuating the heavy social differences in the cities.
Most interesting, however, is the type of investment that has followed the general evolution of their respective economies: Chinese investments have been directed primarily to infrastructure development, while U.S. multinationals have historically invested in mining, oil and other extractive industries.
Trends in Chinese investment in Brazil
Over the past decade, the People's Republic has surpassed the United States as an investor, reaching a total of about 70 billion dollarsi, divided between energy, transportation and logistics.
The Chinese have been particularly active in energy investments in Brazil, working with large Brazilian energy companies and providing capital for monumental projects such as dams and power plants.
In 2018 alone, two state groups, State Power Investment Corporation (SPIC) and Sinohydro, have signed $2 billion worth of contracts in energy projects.
In the transportation and logistics sector, China has made major infrastructure investments, such as theExpansion of rail links between cities and ports Along the Atlantic coast.
Infrastructure investments, by their nature, are economic multipliers enabling job creation and making a contribution to the growth of the Brazilian economy by finding new markets for exports and of developing new sources of energy.
These are the key elements for sustaining the long-term economic development of an economy that needs to unlock its potential.
In addition to energy, infrastructure, technology and agriculture, China has also invested in Brazil in other sectors. In automotive sector, Chinese companies have invested with foresight in the dual direction the industry is taking: electric vehicle production and autonomous driving.
In 2019, Geely invested $600 million in a joint venture with Caio for the production of electric buses, of which China currently leads the world, and Dalian Robotics announced a $172 million investment in the Brazilian market to develop driverless mobility systems.
With the evolution of the Chinese economy and the development of new technologies driven by the "Made in China 2030" program, the penetration of Chinese giants also follows other paths. In 2020, Chinese e-commerce giant Alibaba has invested $750 million in Brazil's largest online marketplace, B2W.
There has also been investment in the telecommunications sector in Brazil, with China Telecom, which has invested $2 billion in the country in 2017. China Mobile also invested $500 million in 2018 in Brazil's telecommunications sector.
In addition, in 2018 Chinese Tencent Holdings acquired a 5% stake in Brazilian entertainment company Grupo Globo for an estimated $1.25 billion.
U.S. investment in Brazil
U.S. investment in Brazil averages about 5 billion a year, among the highest on the continent.
Mexico and Chile also consistently receive high levels of FDI from the United States, the former because of geographic proximity, the latter because it is a relatively open economy and has a rich mining sector.
American deindustrialization over the past three decades is reflected in investment choices. The traditional industry players, apart from energy players, have given way throughout Latin America to big tech such as Microsoft, IBM and Google, with more than $4 billion in venture capital investments between 2016 and 2018.
In Brazil, it could be argued that more than the United States, it is the American Big Techs that have made the most significant operations in the country. In 2020 Microsoft has invested in Brazilian startup Namahe, a fashion-tech platform in grade growth. Amazon has also invested in Brazil in recent years and recently opened new logistics centers in the country.
Google invested in online food delivery platform Zank, while IBM has invested in Brazilian startup Nubank to develop artificial intelligence-driven solutions for the banking sector. Technology companies such as Apple and Uber have invested in Brazilian startups, creating opportunities for further growth in the most innovative markets in the Brazilian economy.
The collapse of the pandemic
The steady growth in foreign direct investment in Latin America saw a sharp drop in 2021 due to the economic crisis related to COVID-19. In Latin America, the total amount of foreign investment was $87.6 billion. Globally, foreign direct investment decreased by one-third to $1 trillion, the lowest value since 2005.
According to the World Investment Report 2021, COVID has had a devastating impact that Latin American countries have had compared to all other countries of equal income with a 45% decrease from the previous year.
Latin American economies have faced collapsing export demand, the falling commodity prices and the disappearance of tourism, leading to one of the worst contractions in economic activity worldwide, which is hovering around 8% of Latin America's total GDP.
Brazil has been particularly affected by the lack of investment in the oil and gas sector, as well as losses in the broader energy sector. As a result, the country has lost about two-thirds of foreign investment in 2020, receiving the lowest figure in more than two decadesi.
Sectors particularly affected by this pressure on foreign capital in Latin America have been infrastructure projects, manufacturing and, of course, the tourism industry. The pause in global travel has had drastic effects for the region, which is estimated to derive 10% of its GDP from the arrival of foreign travelers.
The run-up in commodity prices in 2022 partially offset the losses but with United States and China grappling with domestic economic problems, Brazil and the entire continent will have to stand on their own two feet.
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