Investment in Brazil: From Crisis to Recovery

January 12, 2018

Preview Citation

Format: Chicago

Ivo Krznar, and Troy D Matheson. Investment in Brazil: From Crisis to Recovery, (USA: International Monetary Fund, 2018) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

While Brazil’s deep recession has been broad based, it has been marked by a particularly large fall in investment. Real investment fell by around 30 percent between the beginning of 2014 and the beginning of 2017. This paper finds that a variety of factors contributed to the investment decline, including a deterioration in Brazil’s medium-term growth prospects, rising real interest rates, falling terms of trade, rising uncertainty related to economic policy, rising levels of corporate leverage and lower cash flow. Some of the factors that have weighed on investment over recent years have begun to normalize providing some impetus for a recovery. However, still-high levels of corporate leverage and the prospect of continued uncertainty related to economic policy settings suggest a turnaround in investment is likely to be subdued.

Subject: Financial institutions, Financial services, Gross fixed investment, International trade, Labor, Labor costs, National accounts, Real interest rates, Stocks, Terms of trade

Keywords: Cash flow ratio, Drive investment decision, Financing investment, Global, Gross fixed investment, Growth expectation, Investment, Investment equation, Investment growth, Labor costs, Policy uncertainty, Real interest rates, Recession, Stocks, Terms of trade, WP

Publication Details

Pages:

16
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/006
Stock No:

WPIEA2018006
ISBN:

9781484337417
ISSN:

1018-5941

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