Brazil’s economic slowdown leading finance chiefs of MNCs to rethink investments

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The economic slowdown and uncertainty of the Brazilian market are reasons of worry for multinational companies operating in the country. The performance of the Brazilian market is expected to be weakest as the third-quarter financial results are yet to be announced. Medtronic is concerned over the political disturbance and economic recession as well. Medtronic’s chief financial officer also emphasized that he is more concerned about worsening of the Brazilian economy than Chinese. According to a multinational company spokesperson, the business expenditures will remain elevated in Brazil for a longer period than only 2015-2016 seasons. The nation’s currency, the Real is historically weak, as the economy is facing a sluggish phase and inflation is high. The companies, who have recently invested in the then hot emerging market, are not willing to invest more. Brazil’s recently-announced budget needs enactment of an effective financial-transaction tax policy. The Brazilian Finance Minister is planning to narrow Brazil’s budget deficit by placing a 0.2% tax on currency exchanges and transfers. According to him, the tax measure would be temporary and would not last for more than four years. Petrobras, a corruption scandal, has led the government and banks to keep a close eye on any cash leaving the country. Companies also have to pay taxes on money that leaves the country and banks and regulators require appropriate documentation to justify why it is essential to move money from Brazil to abroad. But, all businesses are not affected by recession. For example, the life insurance business is growing well despite the prevailing unfavorable conditions. Brazil is a strict tax jurisdiction too, which is contributing to the recession.

 

(Image Courtesy: CNN)

Read the full article at Factiva

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