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FDI regulations attracting more investments in Brazil

Foreign Direct Investments have played an essential role in the development of the Brazilian economy. Its large domestic market and favorable government policies have attracted investors. The Brazilian economy has emerged over the years as a strong third world economy partly due to government FDI policies that directed Brazil investments into industrialization, capital flows, technology and services. This has been helped by a liberal FDI regime that encourages foreign investments. The overall effect has been the creation of Jobs and rapid modernization. Brazil attracts more FDI than any other nations in South America and in the developing world.

 

FDI in Brazil have been in diverse areas of the economy. FDI regulations have encouraged inward investment. The country’s FDI share in investments, production and foreign trade has continued to grow over the decades.  The investment regime of Brazil shifted from import substitution to economic liberalization that enabled industrialization. This is due to the fact that, at the time of its policy formulation, Brazils FDI regime didn’t discriminate investments. Tariffs and non-tariff restrictions on imports were liberalized. The FDI share of the country’s investments, production and foreign trade grew over the last decades. As opposed to tariff and non-tariff restrictions as practiced in other states on FDI regulation, the Brazilian regulations were not quite a challenge to investments.

 

A functional regulatory mechanism that applied to all sectors of investments with a radical shift to institutional regulatory mechanism has been the hallmark of Brazil’s FDI regime. Privatization of investments such as services with support from the government led to an efficient and improved service delivery to a large domestic market. During the 1990s, Foreign Brazil investments regime underwent major changes such as structural reforms, trade and finance liberalization, state reforms, improvement of the macro economic environment that sought to balance payments and deficit, microeconomic goals that enhanced competitiveness and export performance. At the legal level, changes were made that eliminated entry barriers enabling equal treatment of all investors and the abandonment of discriminatory FDI policies.

 

With these liberalized market, FDI in Brazil investments grew rapidly overtaking global FDI flows from 1994 onwards. Sectoral policy developments, trade policy development, macroeconomic, foreign trade relations, institutional developments; changes in this various sectors have been a main source of attraction for investors. The result of these gradual FDI policy shifts from their initiation has witnessed an increased FDI flow that has seen Brazil emerge as a favorite investments location.

 

10 May 2010