Home Business Private Investment in Brazil Falls to Lowest Level Since 2000

Private Investment in Brazil Falls to Lowest Level Since 2000

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Brazil’s ongoing recession has led to a decline in investments to the lowest level since 2000, mainly due to the retraction of the private sector.

Estimates of the Brazilian Institute of Capital Markets (Cemec) for Folha show that, since the highest point in recent years, in 2013, the investment rate of companies and families has declined from 19% to 13.7% of the G.D.P. in December in 2016, the worst result since 2000.

Investments are resources used in the purchase of machinery and equipment, civil construction and the development of new products.

Uncertainties generated by the crisis that the country is currently facing and the effort made by companies and families to reduce debts explain part of the decline.

However, the Cemec study suggests that the growing unbalance in government accounts is part of the problem. The data show that the private sector savings are at an all-time high; however, a major part of the resources finances the government instead of purchasing machinery or building factories.

The interest paid to finance the public debt guarantees a return above the possibilities offered to companies for productive investments. This system is bad for the economy at a moment when it needs other drives in addition to consumption to start growing again.

The Cemec study also shows that, following the deterioration of government accounts, the investment rate of the public sector fell to 1.8% of the G.D.P. in 2016, the lowest level since 2004.