U.S. firms led FDI boom in telecoms, cars, energy and steel

BRAZIL has attracted record levels of foreign investment over the past decade—with the biggest proportion coming from the United States.
This very high level of U.S. corporate interest in the country is a reflection of Brazil’s success in opening its market to foreign competition and investment and in strengthening macro-economic conditions for stability and growth.
Hyperinflation has been tamed and a massive privatization program—one of the largest in the world—is underway. Infrastructure has been developed and productivity and competition enhanced in services, utilities and industrial sectors.

A third of the total investments in privatization in Brazil has been made by foreign companies, with the United States leading the way (34.7 percent), attracted by opportunities in the telecommunications, automotive, energy and steel sectors. Other countries that have made major investments include Spain (27.7 percent), Portugal (14.9 percent) and Italy (4 percent).

By the end of the 1990s, according to the U.S. Department of Commerce, the total stock of U.S. foreign direct investment in Brazil had reached more than $35 billion dollars, surpassing the respective figure for Mexico ($34.3
billion) and reaching 4.5 times the level of U.S. direct investment in China ($7.8 billion).
Major U.S. investors include Ford Motor Company, General Motors, Alcoa, Cargill, ExxonMobil, AES, Duke Energy and IBM. Just this year, Ford started exporting Fiestas to Mexico from a new $1.9 billion factory it has built in Bahia in the northeast of Brazil, while Alcoa has announced plans to invest $1 billion by 2008 to become self-sufficient in electricity production at its smelting plants.

The exposure of U.S. banks, such as Citigroup, JP Morgan Chase, FleetBoston Financial and Bank of America, in Brazil is estimated at $25 billion.
With more than 2,000 U.S. corporations conducting business there, it is very much in the interest of the United States that the Brazilian economy remains healthy.
Brazil has inevitably been affected by the economic crisis in Argentina, and falling growth worldwide and in the United States in particular. However, the stabilizing effect of the reforms undertaken since the launch of the Real Plan in 1994 have helped lessen the impact.

In August, the Bush administration backed a $30 billion rescue package for Brazil from the International Monetary Fund. It praised Brazil’s wise economic policies and said the country deserved international support.