American Multinational Companies Are Investing Less In Brazil

- Aug/2018

Trump’s tax policy and electoral uncertainty are among the main issues responsible

The investment of American multinational companies in Brazil has fallen drastically. From 2017 to the present, total investment dropped from 15.7% to 6.6%. Historically, US multinational companies have always been the largest investors in the Brazilian economy, accounting for about 22% of all foreign investment in the country.The decline in investment began in earnest in 2014, when Brazil entered a recession, but intensified after the US tax policy implemented by the current administration, which reduced its companies’ domestic income tax from 35% to 21%. In Brazil, the tax rate remains at 34%.

In addition, as a form of incentive, the new US legislation has allowed multinational companies to repatriate their assets in the US with a lower income tax burden. This option has become extremely attractive to foreign investors unable to expand their operations in Brazil, and have now decided to reallocate their capital to the US or to other countries. Among the companies that have left Brazil in recent years are banking market giants, such as Citibank and HSBC.

Another determining factor for the fall in foreign investment is due to political and economic uncertainty that surrounds the upcoming presidential elections in Brazil, in October. According to analyses by economic experts and market analysts, there is a great deal of concern among US investors regarding issues related to the fate of tax reform and privatization in the Brazil, regardless of which candidate is elected.

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