Investment in Brazil: From Crisis to Recovery
IMF Working Papers, January 12, 2018
Source details
- Canonical URL
- Investment in Brazil: From Crisis to Recovery
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Bibliographic details
- Authors: Ivo Krznar, Troy D Matheson
- Published: January 12, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484337417.001
Summary and central finding
- 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.
- The paper concludes that some factors that weighed on investment have begun to normalize, providing some impetus for a recovery, but a subdued turnaround is likely given still-high corporate leverage and continued uncertainty about economic policy settings.
Drivers of the investment decline
- 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.
- Lower cash flow.
Recovery prospects and dynamics
- Some of the factors that have weighed on investment over recent years have begun to normalize.
- These normalizations provide some impetus for a recovery in investment.
- However, still-high levels of corporate leverage and the prospect of continued uncertainty related to economic policy settings suggest the turnaround in investment is likely to be subdued.
Subject coverage and keywords (as listed)
- Subjects: 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.
Content in this bundle
- Investment in Brazil: From Crisis to Recovery, WP/18/6, January 2018