Topic fdi outflow of brazil in the period of 2015 2021 suggestions to vietnam

Bài tập học phần Kinh tế quốc tế GVHD: PGS.. Bài tập học phần Kinh tế quốc tế GVHD: PGS.. Bài tập học phần Kinh tế quốc tế GVHD: PGS.. - According to the immediate investor criterion, Eu

SCHOOL OF ADVANCED EDUCATION PROGRAMS

INTERNATIONAL ECONOMICS

INDIVIDUAL ASSIGNMENT OF INTERNATIONAL

ECONOMICS

TOPIC: FDI OUTFLOW OF BRAZIL IN THE PERIOD OF

2015-2021 & SUGGESTIONS TO VIETNAM

Name : NGUYỄN HÀ MY

Student ID : 11206183

Major : International Economics

Class : International Business Administration 62C

Instructor : Associate Professor Ph.D Nguyễn Thường Lạng Email : langnt@neu.edu.vn, langnguyen3300@gmail.com

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

GUARANTEE

I hereby declare that I have completed this assignment entirely on my own To the best of my knowledge, the statements and materials used in the exercise are 100 percent accurate, have been cited, and are guaranteed to be precise to the highest degree If the assignment is not performed as specified above, I will accept full responsibility

Hanoi, August 28, 2022

Prepare by

Nguyễn Hà My

THANK YOU

First and foremost, I would like to express my sincere gratitude to all of the

instructors at the National Economics University and, in particular, to the lecturers

at the Institute of International Trade and Economics, who have diligently taught and connected with us valuable expertise and information

I want to express my gratitude to Associate Professor Dr Nguyen Thuong Lang in particular since she helped me out in the exercise Working with you has allowed

me to continue learning and gain a wealth of knowledge that will be very helpful to

me in the future I have also developed a serious and productive work ethic, both of which will be essential for my career path

Hanoi, August 28, 2022 Prepare by

Nguyễn Hà My

TABLE OF CONTENTS

OPENING Error! Bookmark not defined CHAPTER 1: OVERVIEW OF DIRECT Error! Bookmark not defined 1.1 POSITIONS AND TRANSACTIONS Error! Bookmark not defined 1.1.1 The total FDI position Error! Bookmark not defined

1.1.2 FDI net applications

1.1.3 Capital participations flows Error! Bookmark not defined 1.2 DECOMPOSITION OF EDI POSITION VARIATIONS

1.2.1 The variation in the FDI position

1.3 INVESTING REGIONS AND INVESTED

1.4 SECTOR OF ECONOMICS ACTIVITY

1.4.1 Positions

1.4.2 Transactions

1.4.3 Profitability

CHAPTER 2: TRADE RELATIONSHIP BETWEEN BRAZIL AND ARGENTINA 12 2.1 TRADE BETWEEN BRAZIL AND SOUTH AMERICA (2000 – 2021) 12 2.1.1 Brazil's intra-regional trade with South American countries Error! Bookmark not defined

2.1.2 Growth continued to return Error! Bookmark not defined 2.1.3 Argentina continues to be one of Brazil's main trading partners Error! Bookmark not defined

2.2 TRADE BETWEEN BRAZIL AND ARGENTINA (2000 – 2020) Error! Bookmark not defined

2.2.1 Existing trade between Brazil and Argentina Error! Bookmark not defined

2.2.2 Trade between Brazil and Argentina has remained concentrated in five

chapters Error! Bookmark not defined 2.3 IMPACTS OF TEC REDUCTION Error! Bookmark not defined

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

3.1.1 Definition Error! Bookmark not defined 3.1.2 About BNDES Error! Bookmark not defined

CHAPTER 4: SUGGESTION TO VIETNAM 18 4.1 SIMILARITIES AND DIFFERENCES 18 4.2 COMMENT 18

CONCLUSION Error! Bookmark not defined LIST OF REFERENCES Error! Bookmark not defined APPENDIX 01 APPENDIX 02 APPENDIX 03:

Chuyên đề thực tập GVHD: PGS TS Nguyễn Thường Lạng

INTRODUCTION

1 Inevitability of topic selection

The Foreign Direct Investment in Brazil Report presents statistical analyses of the direct

investment liabilities position in Brazil from 2010 to 2016 Direct investment is the most

important external investment category for the Brazilian economy At the end of 2016, the direct investment liabilities position was approximately equivalent to half of the country’s total external liabilities Direct investment liabilities registered net inflows over the entire series and have been systematically less volatile than portfolio and other investment categories (loans and trade credits, among others) According to international methodological standards, a direct investment relationship occurs when an investor from one economy holds voting power of 10 percent or more in an enterprise of another economy.1 Under these conditions, the direct

investor effectively participates on the decisions and the strategy of the business, maintaining a stable and long-term interest in the direct investment enterprise (enterprise that receives direct investment) Direct investment has two components: equity and debt instruments The equity component refers to nonresidents’2 ownership of shares of enterprises resident in Brazil; the debt instruments component comprises credit granted to enterprises resident in Brazil by

nonresident enterprises belonging to the same economic group The major data source for the compilation of direct investment liabilities statistics presented in this report is the Census on Foreign Capital in Brazil (Census) As of 2010, the Quinquennial Census, performed for the years ending in zero or five, is censitary, and encompasses all enterprises resident in Brazil that have a nonresident investor owning part of its equity For the remaining years, an Annual Census collects data from a subset of these respondents, comprised of large corporations only Estimates for smaller enterprises that do not participate in the Annual Census are made for the positions, for which there are complementary databases The estimation process is described in the methodological annexes For this reason, some direct investment liabilities statistics are presented only for 2010 and 2015

CHAPTER 1: OVERVIEW OF DIRECT

- In 2019, the total FDI position increased by 8.9% compared to the previous year Net flows increased to US$22.8 billion

1.1 POSITIONS AND TRANSACTIONS

1.1.1 The total FDI position

The total FDI position totaled US$416.6 billion in 2019, of which US$385.0 billion in equity participation and US$31.5 billion in intercompany operations The 2019 total position increased by US$34.0 billion compared to 2018 Like the PDI, the FDI position in 2019 is the highest value observed in the series, as illustrated in Figure 9

1.1.2 FDI net applications

FDI net applications totaled US$22.8 billion in 2019, a significant increase from the US$2.0 billion observed in the previous year Figure 10 shows the recent evolution of FDI transactions accumulated in twelve months

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

- In 2019, capital participation flows, excluding reinvested earnings, totaled US$9.7 billion and once again contributed to increase total FDI, after generating net divestments of US$5.0 billion

in 2018 Reinvested earnings exceeded US$2 7 billion in 2018 to US$11.1 billion in 2019 Net grants from intercompany operations contributed US$2.0 billion to 2019 FDI Figure 11

demonstrates the composition of FDI flows

2 Decomposition of EDI position variations

- As with the FDI position, the variation in the FDI position is explained by transactions,

parities and prices, and other variations Figure 12 shows the decomposition of changes in FDI positions – Equity participation between 2017 and 2019 From 2017 to 2018, the FDI position decreased from US$358.4 billion to US$345.7 billion, or 3.5%, and all components contributed

to the setback From 2018 to 2019, the FDI – Equity Equity position increased to US$385.0 billion, or 11.4% While transactions recorded in the balance of payments reached US$20.8 billion, other changes in volume added up to US$18.9 billion

2.1.1, Investing Regions and invested

Europe is the main investing region in the country; Caribbean and Europe are the main

regions invested

- According to the immediate investor criterion, Europe remains the region with the largest stock of PDI in Brazil in 2019, with 67.8% of the total of US$874.0 billion, as shown in Figure

20 There was a small increase compared to 66.1 % of the total of US$737.9 billion registered

in the previous year North America is the region with the second largest stock of PDI, with 17.6% of the total

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

- As shown in Figure 21, the Netherlands stands out as the main immediate European investors, with 42.4%, followed by Luxembourg, 13.3%, and Spain, with 13.2% of the European total (US$593.3 billion) France, Switzerland and the United Kingdom are, in sequence, the other main European investor countries

The IDP position of North American immediate investors totaled US$153.7 billion, of which 80.9% comes from the United States, as shown in Figure 22

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

Some countries hold significantly larger positions when compiled by the criterion of immediate investor country, compared to the concept of final controller

This is the case of the Netherlands and Luxembourg, host countries of intermediary companies, which act in the channeling of direct investment from final controlling countries to the

destination countries

Other countries exhibit higher IDP - Equity positions according to the final controlling country criterion, such as the United States, Spain, Belgium, France and China These countries are home to companies that channel the IDP through intermediary countries

Comparing the IDP positions in the immediate investor and ultimate controller criteria, the Netherlands presents the biggest difference: the position by the immediate investor criterion is US$149.8 billion and US$25.3 billion by the ultimate controller criterion, as shown Figure 23 Belgium presents the biggest difference in the opposite direction: position of US$5.5 billion according to the immediate investor criterion and US$41.0 billion according to the final

controller criterion

The FDI position reached US$416.6 billion in 2019 The highest positions according to the criterion of immediate investment country are in the Caribbean and European regions, which account for 47.0% and 37.7% of the total, respectively, as Figure 24 shows In the Caribbean, FDI positions stand out in the Cayman Islands, 44.2%, and the British Virgin Islands, 29.8% In Europe, the Netherlands, 55.9%, and Luxembourg, 16.0% stand out

4, Sector of economics activity

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

Almost a third (31.6%) of the FDI – Equity Equity position is invested in companies

incorporated to acquire financial assets, as shown in Figure 29 Then come companies that operate in financial and auxiliary services activities, with 18.9%

4.2 Transactions - Equity participation and operations intercompany

In 2019, the highlights were the gross inflows in IDP – Equity participation, excluding

reinvested profits, from the oil and natural gas extraction sector, responsible for 20.2% of the total, as shown in Figure 30

As for IDP transactions – Intercompany operations in 2019, the coke, oil derivatives and

biofuels, and agriculture and mineral extraction sectors stood out in both inflows and

amortizations The vehicle sector showed significant inflows, while the financial services sector was an important contributor to gross amortizations Figure 31 depicts the transactions of

intercompany operations by sector of economic activity

Gross investments of FDI – Equity participation, excluding reinvested earnings, totaled

US$14.2 billion in 2019 Companies in the financial services sector were the main destination

of these flows, as shown in Figure 32

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

the vehicle sector went from profits, between 2010 and 2014, to losses as of 2015

2.1 Trade between Brazil and South America (2000-2020)

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

Continuous trade with South American countries tends to decrease In 2020, South America's participation in Brazil's total exports

is 10.8% (22.7 billion USD); Compared to total imports, it only reached 11.4% (equivalent to 18.2 billion USD)

- Growth continued to return in the periods 2014-2016

and 2018-2020 A slight rebound is observed from 2017 to 2018, no less than relations with China or the rest of the world

rest of the world

- Argentina continues to be one of Brazil's main trading partners, as it reduces its share

from 12% in 2000 to 4.5% in 2020

2, Trade between Brazil and Argentina (2000-2020)

- Between 2010 and 2020, existing trade between Brazil and Argentina has fallen sharply In

2020, the current trade will receive 16.4 billion US dollars According to the analysis, Brazil's cumulative trade surplus with the neighboring country over two decades reached $47.9 billion USD

- The same movement of emphasis signs still occurs with imports Brazil's imports originating from Argentina will decline from 12% to 5% between 2000 and 2020 During the same period, purchases of Argentine products from Brazil will decrease from 25.6% to 20.4%

- In the last twenty years, according to the classification of the Harmonized System (SH2) When comparing the years 2000 and 2020, some important changes can be seen in the

composition of Brazilian exports to Argentina, even though the sets of goods have remained around 55% of the total sold by Brazil over the period In general terms, the greater expansion

of SH2 87 (vehicles and parts) and the retraction of SH2 84 (nuclear reactors, boilers,

machinery, apparatus and mechanical instruments) and SH2 85 (machinery and electrical appliances), both both in nominal values and in relative terms The shares of SH2 39 (plastics) and SH2 48 (paper and cardboard) also increased

Bài tập học phần Kinh tế quốc tế GVHD: PGS TS Nguyễn Thường Lạng

- The automobile industry occupies a significant weight in Argentina and Brazil's exports to each other

3, Impacts of the TEC reduction

- Recently, the Brazilian government defended a linear reduction of 20% in the tariffs applied

by the bloc, with 10% at the end of 2021 and the other 10% in 2022

Argentina

- Statistics on FDI are notoriously lacking, especially when compared to statistics on foreign trade, based on customs records

- The measurement of two FDI stocks, accumulated over time, affected by changes in exchange rates, as well as the appreciation or devaluation of the two assets in terms of national

currencies This is especially problematic in countries like Brazil and Argentina, which are subject to a lot of macroeconomic volatility

- Published statistics also frequently lack standardization, or make longitudinal analysis and comparison difficult with other countries, as well as cross-references with other databases Why should we invest abroad? Among the reasons suggested by the documentation are:

+ Brazil and Argentina MNCs will tend to appear in sectors and industries where these

countries have a comparative advantage - natural or created - and Investment will tend to be concentrated

- Brazilian investor participation in FDI into Argentina reached 5.7% in 2019, putting Brazil in fourth place among the largest FDI suppliers to the country, after the United States, Spain and the Netherlands