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Investments mark the Spanish presence in Brazil

Spanish Prime Minister Mariano Rajoy and Brazilian President Michel Temer talk after the signing of agreements at Planalto Palace in Brasilia, on April 24, 2017. 
Rajoy is on a three-day visit  to Brazil. / AFP PHOTO / EVARISTO SA

 

 
 

Latin America represents a preferential destination for investments from Spain . With a stock accumulated in 2015 that represented almost 30% of the total invested abroad, the Latin American region is in this issue only behind Europe, where not only the geographical proximity but also the facilities offered by the European agreements. Within the region, Brazil is the main destination of Spanish investments, according to the data of the Spanish Ministry of Commerce, accumulating 29% of the Spanish investment stock in the region and 7.7% of total investments Spanish women in the world.

Brazil is the ninth largest economy in GDP and the fifth country in terms of population, which has allowed it to exercise a regional leadership role through various political and economic processes. However, if we look at the evolution since the beginning of the decade, we see a worsening of economic conditions. If in 2011 it represented 43.1% of Latin American GDP and 3.6% of world GDP, these proportions in 2016 were 33% and 2.4%, respectively. This loss of positions in the international context is reflected in the Elcano Global Presence Index, that would come to show to what extent and how countries are projected towards the outside of their borders. If since 2000 Brazil has increased its global presence in a solid manner, since 2013 a trend of loss of presence in the world begins. This index allows the disaggregation of the projection of a country in three dimensions (economic, military and soft) that are composed of various indicators. In the case of Brazil, its presence in the world is fundamentally economic (56.2% of its global presence in 2016).

 

 

These results can be shelled, so that it is possible to know which variables have more weight in their economic projection are those related to the export of primary goods and investments (23% and 17% on the global presence of Brazil respectively). The weight of the primary sector in the Brazilian external projection can be interesting since the country is conceived as one of the economies that has reached the highest level of development of the productive forces in the region. But if you look at your export matrix and its status as a semiperipheral economy, the value of Brazil’s manufacturing exports in 2015 was equivalent to 67% of the value of its exports of primary goods. The export destinations are very marked by the type of product exchanged,

The fact that the soft dimension has been gaining ground over the Brazilian military presence does not have to be positive news. Even so, Brazil continues to be an important regional actor in the military and highlights that at the end of 2017 the US was invited for the first time to participate in military maneuvers in the Amazon, along with Colombia and Peru . If in general terms its soft dimension has been headed by the science indicator, reaching 7% of its global presence last year, in recent years the information indicator has gained weight, motivated by the appearance of the country in global media following the sporting events held in the country, the corruption cases of Petrobras and Odebrecht, the economic crisis of 2015 and theimpeachment to then President Dilma Rousseff . Precisely, it was expected that the holding of two world-class sporting events in such a short period of time would attract the necessary investments to develop a stunted tourism sector.

 

Datamerica-Brasil-2

 

Brazil continues to offer great opportunities for Spanish capital as can be seen in gross investment flows to Brazil, which represented 16.8% of total Spanish investment abroad in 2015. The role of science in the Brazilian projection is in line with the political commitment to the development of innovation and technology embodied in the creation of the Brasil Maior Plan , which aims, among others, to support innovation and productive development of the Brazilian industrial park through various tax advantages to investors.

88% of direct investment by Spain in Brazil is concentrated in the seven sectors indicated in the graph, where Spanish companies stand out. These would be the cases of Banco Santander , in the country since 1982 and being the first international bank by volume of assets; Telefónica-Vivo, in the country since 1998 and which in 2014 agreed to buy Global Village Telecom; o Abertis, which through its investee company Aertis has established itself as the largest highway operator in the country. For its part, the technological Indra, which works as a provider of satellite communication technologies of the Brazilian Armed Forces has just launched in the country “Minsait” , its business unit to support companies in their digital transformation.

The privatizations of the nineties allowed some Spanish companies to make large investments in order to settle in the market through the acquisition of Brazilian public companies or the creation of subsidiaries. The Brazilian government has proposed a new privatization program that abandons the policy of national champions that had been retaken by the different governments of the PT. With a primarized economy and without the prices of raw materials showing signs of increasing, the government of Michel Temer aims to balance the budget. Therefore , it has launched the Program Parcerias de Investimentos and the program Avançar Parcerias ,whose purpose is the attraction of investments through 57 privatizations. However, we must pay attention to the effects that these policies will have beyond the budgets, since these are acquisitions that imply a change of ownership of the companies but do not have to involve a direct transformation of the productive structure of the country.

The announcements made present great opportunities for some Spanish companies . The de-stamping of the Eletrobrás company or the concession of exploration and exploitation plans for hydrocarbons and mineral resources are of great interest for Spanish energy companies such as Iberdrola, Gas Natural Fenosa or Repsol. However, it is not with the primary-exporter profile of Brazil that Spanish investments are more related, but with the existence of an important internal market to provide services and in which these companies have managed to consolidate. For its part, Telefónica has shown interest in taking control of the first Brazilian national satellite and Banco Santander can play an important role in this whole process by acting as a financier of the privatizations.

 

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