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Projections Place Brazil Among the Worst Countries in the World in Terms of Investments; Experts Highlight the Need for Structural Reforms and Fiscal Sustainability.
Did you know that Brazil is among the worst countries in the world in terms of investment? The International Monetary Fund (IMF) projects that the investment rate in Brazil will be between 15% and 16% of the Gross Domestic Product (GDP) from 2024 to 2029, placing the country among the 20 worst in the world in terms of investment. Let’s understand better what this means for the economy and how it affects our future.
The Current Situation of the Investment Rate in Brazil
In 2023, the investment rate in Brazil, which measures how much is invested in the country’s development and infrastructure, was 16.1%, positioning the country in the 24th worst place among the 170 countries analyzed by the IMF. By the end of 2024, the expectation is that this rate will be at 15.9%, which is likely to result in Brazil finishing the year in 20th place.
In 2029, the forecast is even less optimistic, with a rate of 15.4%, placing the country in 21st position among the worst in the world.
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In 2021 and 2022, Brazil showed a slight recovery with investment rates of 19.5% and 18.1%, respectively. This temporary improvement was the result of the post-pandemic recovery. However, since 2010, the best performance recorded was in 2011, when the country achieved an investment rate of nearly 22% of GDP, ranking 72nd globally.
The Challenge of Low Investment Rates in the Brazilian Market and the Worst Countries in the World
Investments are crucial for economic growth. They help create jobs, improve infrastructure, and increase the country’s competitiveness. When the investment rate is low, it means we are investing little in our own future.
In an interview with the newspaper Valor Econômico, Francisco Pessoa Faria, senior economist at LCA Consultores, highlighted that only 9% of the countries analyzed by the IMF will have a Gross Fixed Capital Formation (GFCF) worse than Brazil’s in the medium and long term. This places us among the countries with the lowest levels of investment.
Historically, an investment rate of around 15% of GDP is considered very low for Brazil, nearing the historical lows of 14.5% recorded in 2016 and 2017. Economists suggest that an ideal rate would be between 17% and 19%.
The global average investment rate is significantly influenced by China, which raises the world average to 26.8% between 2023 and 2029. Without China, this average drops to 23.5%. In emerging countries, the average with China is 32%, while without the Asian country, it falls to 26%. In Latin America, the estimate is 19.7%.
International Comparisons and Challenges
IMF projections indicate that the average investment rate worldwide in 2024 is expected to be 26.5%, while advanced economies will finish the year at 22.3%. This contrast further highlights the need for improvements in Brazil’s investment rate.
Ernesto Revilla, chief economist at Citigroup for Latin America, explains that low investment rates in Brazil are caused by severe recessions, such as those in 2015 and 2016, in addition to the effects of the pandemic. He believes that overcoming this problem requires strengthening macroeconomic fundamentals, especially regarding fiscal sustainability, and building a narrative of sustainable growth.
Despite the challenges, Revilla sees a great potential for Brazil to attract investments, due to the diversity of its economy. For this, it is crucial that the country implements measures to increase the investment rate, creating a more attractive environment for investors.
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