Foreign Investment
While manufacturers have struggled, foreign companies betting on strong demand from a growing middle class plowed a record $67 billion in foreign direct investment into the country last year.
The investment rate fell to 19.3 percent of GDP last year from 19.5 percent in 2010. Investments will grow 10 percent this year, Mantega said today.
Auto manufacturers including Anhui Jianghuai Automobile Group Co. from China and Germany’s Bayerische Motoren Werke AG plan to invest an estimated 30 billion reais in Brazil over the next three to five years, according to the Trade Ministry.
The recovery may soon run into capacity constraints that reignite inflation concerns, Alberto Ramos, chief Latin America economist at Goldman Sachs & Co. said before today’s GDP figures. Economists forecast policy makers will have to reverse course and raise rates again next year to prevent inflation from picking up, futures contracts show.
While the pace of price increases is slowing, inflation has remained above the government’s 4.5 percent target since August 2010. In mid-February it stood at 5.98 percent.
Analysts expect Brazil’s economic growth to accelerate to 3.3 percent this year and to 4.15 percent next year, according to a March 2 central bank survey of about 100 economists.
“The capacity for the economy to grow at 5 percent on a sustainable basis without generating inflation is still not there,” Ramos said in a telephone interview from New York.