Trade and Investment

A focus on foreign investment can drive our recovery from COVID-19

Some advice from Brazil - one of the world's top destinations for FDI

Some advice from Brazil - one of the world's top destinations for FDI Image: Raphael Nogueira / Unsplash

Sergio Segovia
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  • Investment promotion agencies (IPAs) around the world are demonstrating their criticality as we begin the recovery from COVID-19.
  • There is still plenty of interest in FDI worldwide.
  • By focusing on engagement with partners, IPAs can help their economies emerge stronger from the crisis.

The COVID-19 crisis has brought to light the critical role of investment promotion agencies (IPAs), who have had to demonstrate agility and reactiveness in supporting the needs of investors.

This is supported by UNCTAD data, which reports that 77% of national IPAs worldwide have provided COVID-related information and services and developed specialized virtual tools and platforms.

For IPAs it has never been more important to remain close to our investor communities and key stakeholders in our exporting markets around the world, as well as to the businesses and sectors that we support.

It is predicted that global foreign direct investment (FDI) activity may fall by up to 40% due to the economic crisis caused by the pandemic.

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While that figure gives pause for thought and is clearly a bad knock for the global economy, it also reveals that there is still a lot of interest worldwide in pursuing the right FDI opportunities, and that investment activity, while reduced, will continue. At the Brazilian Trade and Investment Promotion Agency (Apex-Brasil) we believe that investors are seeking to make securer investments than in the past, with a lower risk profile and a long-term return.

That is an entirely natural reaction that probably accounts for a good portion of that 40% shortfall.

Much as financial markets flock to gold as a haven in times of turbulence, we see FDI investors seeking to make smart investments in growth economies with long-term success potential. To take Brazil as an example: the economy rests on a secure foundation with a strong reputation among foreign investors. Only last year Brazil was named one of the world’s top destinations for FDI by UNCTAD, receiving $72bn in FDI.

Rethinking FDI

Under the pandemic scenario, investors are seeking to maintain business as usual. Apex-Brasil has had to completely rethink our FDI flows – how we maintain and even enhance that level of support and closeness to all our global stakeholders, wherever they may be. A greater emphasis must be placed on providing on-time intelligence to policy-makers, business leaders and entrepreneurs, while at the same time maintaining foreign investors’ confidence in our market in this period of heightened uncertainty, and continuing to connect them with the outstanding investment opportunities within the country we represent.

Just one example of how we’ve been doing this at Apex-Brasil is our new Market Intelligence Report. We have also developed a tool that tracks different business indicators, including but not limited to Brazilian exports and imports, in the context of the current crisis. This interactive tracker allows both companies and public policy-makers to accurately trace the influence of the crisis on various sectors of foreign trade. We are also proactively soliciting strategic insights from the international investor community in managing and directing their investments during the crisis and will use this intelligence to develop solutions designed specifically to address investors’ biggest concerns.

Next year could see a resurgence of FDI inflows around the globe
Next year could see a resurgence of FDI inflows around the globe Image: UNCTAD World Investment Report 2020

Such proactive measures are key if we are to mitigate the impact of the economic downturn caused by the pandemic, create more market certainty, and stem the worrying tide of investor flight.

Another key resource which must be tapped into is the global dynamism of start-up culture. For countries around the world, supporting and securing the short-term prospects and operational capabilities of small and medium enterprises (SMEs) and start-ups during this crisis is critical to developing this key growth segment and diversifying economies in the long-term.

For Brazil, almost $1bn in support funding has been earmarked specifically for micro, small and medium-sized companies. Allied to this, Apex-Brasil has developed a business action plan to help Brazilian entrepreneurs and business leaders make informed, strategic decisions to navigate the crisis. This interactive plan, available for free on Apex-Brasil’s website, includes both a step-by-step guide for crisis management and proactive tips on how to protect finances.

Tools to help small businesses, micro-entrepreneurs and start-ups develop resilience and rebuild will be vital as we continue to navigate the choppy waters of the crisis towards recovery.

Initiatives like Mega Hack COVID-19, a creative virtual hackathon supported by Apex-Brasil, has co-created plenty of programmes designed to streamline affordable digital advertising and job filling – ensuring companies find talent more easily and boost and preserve capital for SMEs. Such great initiatives are a unique opportunity for IPAs to connect creative community innovators with potential investors and capital to turn ideas into reality.

IPAs have drastically lowered their expectations for FDI as a result of the crisis
IPAs have drastically lowered their expectations for FDI as a result of the crisis Image: UNCTAD World Investment Report 2020

Going digital

The crisis has also forced the workspace to go digital and we, along with many others, have had to rethink and massively ramp up our digital capabilities. We now regularly promote videoconferences, online roundtables and other such webinars, connecting a wide cross-section of key stakeholders from Brazil and abroad.

Companies, sectors and industries must continue to invest in their digital capabilities in order to adapt to current and future challenges.

These can be truly successful and no less engaging than in-person events. Our July Invest in Brazil Infrastructure virtual roundtable succeeded in gathering over 1,100 participants from 48 countries. Another event in June, the Business Connections Brazil – Food and Beverage, saw the participation of almost 500 local suppliers and foreign buyers from over 40 countries. Over 670 business meetings were held as well as educational webinars to present export support tools and market opportunities in participating countries. Ultimately, the event managed to secure almost $30 million of immediate business with $150 million expected over the next 12 months.

The focus of investment promotion agencies like Apex-Brasil needs to be stronger than ever to ensure that we maintain and develop our competitive edge when it comes to global investment. It has never been more important than in this time of unprecedented crisis. And that is why we will continue to redouble our efforts to help entrepreneurs, start-ups and business leaders engage with the global investment community and emerge even stronger and more resilient once this crisis passes.

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