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UNIVERSITY OF INTERNATIONAL ECONOMY INSTITUTE OF INTERNATIONAL TRADE AND ECONOMY DEPARTMENT OF INTERNATIONAL ECONOMY PERSONAL EXERCISES FOR INTERNATIONAL ECONOMY SECTION Thesis: Analyzing the conditions and policies to attract foreign direct investment capital of Brazil, thereby drawing lessons and practical experiences for Vietnam h Student's full name : Vu Anh Quan Student code : 11218039 Specialties : Management Science Part class : International Economics (222)_09 System : Regular Instructor : Assoc Prof Dr Nguyen Thuong Lang Email : langnt@neu.edu.vn , langnguyen3300@gmail.com Tel : 0983478486 Period of study : Semester of the academic year 2022-2023 phone number : 0965230663 Student email : quanvu389203@gmail.com Bài tập học phần Kinh tế Quốc tế GVHD: PGS TS Nguyễn Thường Lạng h Bài tập học phần Kinh tế Quốc tế GVHD: PGS TS Nguyễn Thường Lạng GUARANTEE I hereby declare that this assignment is entirely my own work The quotations and materials used in the exercise are completely honest, are sourced from and guaranteed to the highest degree of accuracy to the best of my knowledge If it is not as stated above, I take responsibility for my assignment Hanoi December 23, 2022 Students perform THANK YOU First of all, I would like to express my deep gratitude to the lecturers of the National Economics University in general and the lecturers of the Institute of International Trade and Economics in particular, who have dedicatedly h taught and communicated to us valuable knowledge and experience Especially, I would like to thank Assoc.Prof.Dr Nguyen Thuong Lang, who directly guided me throughout the course of the exercise During the time working with you, I have not stopped learning to accumulate a lot of useful knowledge for myself, but also have learned the spirit of serious and effective work, these are very necessary things for me in my career future study and work Finally, I would like to express my sincere thanks to my family and friends who have always encouraged, contributed ideas and helped in the process of studying and researching to complete this exercise Hanoi, December 23, 2022 Students perform Bài tập học phần Kinh tế Quốc tế GVHD: PGS TS Nguyễn Thường Lạng Table of contents Prologue .3 Chapter : Theoretical basis of FDI capital 1.1 Theory of FDI Important characteristics of FDI capital Brief statistics and movements of FDI in recent times 1.1.1 Foreign Direct Investment (FDI) .6 1.1.2 The role of FDI capital 1.1.3 Factors attracting FDI inflows 1.2.1 Brief statistics and movements of FDI in recent times 11 Chapter Outstanding achievements in attracting FDI in Brazil Analyze the characteristics and conditions of Brazil in attracting foreign capital .13 2.1 The situation of attracting FDI in Brazil .13 2.1.1 The situation of FDI capital invested in Brazil in recent years 13 2.1.2 Major investment countries 13 2.1.3 Major investment industries .14 2.2 Conditions and policies of Brazil in attracting FDI 15 2.2.1 Market size .15 The stability of the economy 16 2.2.3 Labor costs and productivity 16 2.2.4 Business environment 17 2.2.5 Tax incentives 17 h 2.2.2 Chapter 3: Experiences and practical lessons that Vietnam has learned from Brazil's conditions for attracting FDI 18 3.1 Current situation of FDI inflows into Vietnam 18 3.2 Current conditions and policies to attract FDI in Vietnam 20 3.2.1 Market size .20 3.2.2 The stability of the macro-economy 20 3.2.3 Commercial expansion 21 3.2.4 Infrastructure 22 3.2.5 Tax incentives 24 3.3 Experiences and practical lessons that Vietnam has learned from Brazil's FDI attraction activities 25 Conclusion 27 List of references 28 Bài tập học phần Kinh tế Quốc tế GVHD: PGS TS Nguyễn Thường Lạng Heading The necessity of choosing a topic Brazil is a mixed economy country developing countries , by 2020 the country is the twelfth largest economy in the world by nominal gross domestic product (GDP) and the eighth largest by purchasing power parity According to estimates by the International Monetary Fund (IMF), Brazil's nominal GDP in 2020 is 7.348 trillion Reals equivalent to 1.363 trillion US dollars Brazil is the 83rd country in the world in terms of GDP per capita with an income of US$6,450 per person Brazil is a country rich in natural resources h At the start of the new century , Brazil experienced an economic boom that lasted until 2014 The boom lifted 29 million people out of poverty and narrowed the inequality gap between the poorest and richest , income increased by about 4.4% for the population as a whole (World Bank, 2016) But this boom, interpreted as a "growth miracle", has put Brazil on the list of BRIC countries; Brazil, the Russian Federation, India and China, first identified by Jim O'Neill of Goldman Sachs in 2001 and then again in 2003, as the four countries expected to grow the fastest and become an important opportunity to expand abroad However, after 2014, the situation reversed and Brazil once again fell into a deep recession, with growth slowing, inflation rising and unemployment rising Part of the economic crisis stems from a drop in the global price of raw materials, to which Brazil is vulnerable due to its status as an exporter of raw materials The economic crisis was closely intertwined with the deepening political crisis in early 2016 At the time, incumbent President Dilma Rousseff was accused of covering up the budget deficit by borrowing from state-owned banks and therefore not through congress the deficit This political crisis has left the government paralyzed and incapable of taking concrete action to get out of the economic crisis In addition to the economic downturn and political turmoil, a major corruption scandal involving Brazilian state oil company Petrobras and several construction companies has been exposed, eroding trust and creating many more political instability During this time, a new downward trend has been noticed in the Brazilian economy, where the inflation rate is once again increasing while the GDP growth rate is decreasing However, the topic of this exercise will not be about Brazil's economic slowdown, but instead will focus on Brazil's period of explosive economic growth from 20 to 2014 Learn about the regulatory policies, Brazil's outstanding advantages in attracting FDI from abroad, which played a big role in Brazil's miraculous growth Bài tập học phần Kinh tế Quốc tế 2.1 GVHD: PGS TS Nguyễn Thường Lạng Research objectives and tasks Target On the basis of actual analysis, assessing the advantages and limitations of Brazil's FDI attraction policy, thereby drawing experience and practical lessons in the policy of attracting FDI capital from abroad of Vietnam 2.2 Mission To achieve the above research purpose, the study will perform the following research tasks: First, introduce the economic achievements of Brazil in the period 2010-2014 Second, analyze the advantages in natural conditions, Brazil's policies in attracting FDI from abroad Third, draw experiences and practical lessons and make recommendations in Vietnam's policies to attract FDI from abroad h Object and scope of the study 3.1 Object: Brazil's FDI attraction policy 3.2 Scope: FDI inflows into Brazil and orientation for Vietnam's FDI attraction policy Research Methods The thesis uses the method of analysis, synthesis, comparison to solve the posed problem The data is collected from documents and documents belonging to a number of individuals and international organizations in the world Structure of the topic In addition to the introduction, the end, the table of contents, the list of references, the topic is presented in chapters: Chapter 1: Theoretical basis of FDI capital Chapter 2: Brazil's outstanding achievements in attracting FDI Analyze the characteristics, conditions and policies of Brazil in attracting foreign capital Document continues below Discover more from: Kinh tế quốc tế TMKQ11 Đại học Kinh tế Quốc dân 999+ documents Go to course Kinh tế quốc tế - dịch chuyển quốc tế 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search of economic advantage and productivity enhancement, offshore investment is becoming more and more popular among MNEs There are two types of investments that can be made internationally: Portfolio Investment and Foreign Direct Investment Portfolio investments refer to investments in foreign stocks, bonds or assets without the intention of controlling them The second type of international investment, and one of the concerns of this thesis, is called Foreign Direct Investment (FDI) h FDI refers to the investment or acquisition of property in another country for the purpose of controlling it This can be done in a variety of ways; buy property or equipment from a foreign company or enter into cooperation with local companies, known as joint ventures Alternatively, a company can what is known as green FDI by simply building a local base from scratch Typically, FDI is part of a long-term strategic plan in which a company seeks to increase output or access markets Foreign direct investment has the potential to bring many positive economic effects to both the "host" and "home" economies, such as creating long-term cooperation between economies, improving competitive position and open up new markets for investors, a fact that is especially true for developing and emerging markets the past few decades , the world has seen a rapid increase in FDI and although most FDI moves between developed countries, a large part of FDI flows into developing countries a very important factor in the global economy For emerging markets FDI is particularly important for economic development, as it facilitates the exchange of skills and technology and provides access to international markets Because of the possible benefits of FDI, developing and emerging markets take actions to become more attractive to FDI 1.1.2 The role of FDI capital For all social interactions, everything has two sides Of course, FDI capital is no exception, it brings both positive and negative effects to both the Bài tập học phần Kinh tế Quốc tế GVHD: PGS TS Nguyễn Thường Lạng investing country and the receiving country Here, based on the context of learning how to attract FDI, we will only consider the effects of FDI on the host country 1.1.2.1 Positive role Firstly, FDI adds capital to the economy: FDI not only adds capital for development investment but also is a more stable capital flow than other international investment flows, because FDI is based on a long-term perspective limited on the market, on growth prospects and does not create debt for the host country's government, so it is less inclined to change in adverse circumstances Second, FDI provides new technology for development: It can be said that technology is the decisive factor for the growth and development of every country, for developing countries, this role is even more important clearly confirmed Therefore, enhancing technological capabilities is always one of the top priority development goals of every country However, to realize this goal requires not only a lot of capital but also a certain level of development of science and technology h Third , FDI helps to develop human resources and create jobs: Human resource development and job creation are important factors in promoting economic growth The objective of foreign investors is to obtain maximum profits, strengthen their foothold and maintain a competitive position in the world market Therefore, they are particularly interested in taking advantage of cheap labor in host countries The number of direct workers in FDI enterprises is increasing rapidly in developing countries In addition, the activities of providing services and outsourcing for FDI projects also create more job opportunities In fact, in developing countries, labor-intensive FDI projects train many young women This not only brings them the benefit of high income, but also makes an important contribution to the cause of women's liberation in these countries Fouth, FDI helps to expand markets and promote exports: Export is an important factor of growth Thanks to the promotion of exports, the comparative advantages of factors of production in the host country are exploited more effectively in the international division of labor Developing countries, although capable of producing at competitive costs, still find it difficult to penetrate international markets Therefore, Bài tập học phần Kinh tế Quốc tế 2.2 GVHD: PGS TS Nguyễn Thường Lạng Conditions and policies of Brazil in attracting FDI Based on the characteristics of incentives and factors to attract FDI, Brazil proved to be a promising country for other countries to invest in 2.2.1 Market size According to the literature, market size or market opportunity as measured by GDP per capita is one of the stronger determinants of FDI It is clear that the large market has a positive effect on FDI inflows for foreign companies that engage in horizontal or market-seeking FDI because a large market yields a larger consumer base GDP Per Capita Current US$ $14,000.00 $12,000.00 $10,000.00 $8,000.00 $6,000.00 h $4,000.00 $2,000.00 $2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Axis Title Year GDP per capita in Brazil has grown rapidly over the past decades From $5,144 in 1996 and the government trying to clean up their underperforming economy, to $11,728 in 2014 The most significant increase can be seen from 2002 to 2021 when GDP averages per capita more than quadrupled to reach a maximum of $13,039 in 2011 After peaking in 2011, GDP per capita declined slightly for the first time, indicating a declining standard of living This is due to the economic and political crisis among other factors Furthermore, one can also perceive the great social disparities that exist in Brazil, where wealth is unevenly distributed between regions and individuals Although living standards have increased, the annual growth rate of GDP per capita has been quite volatile since 1996 with a peak of 6.5% in 2010 16 Bài tập học phần Kinh tế Quốc tế GVHD: PGS TS Nguyễn Thường Lạng Some studies also measure market size with population or population growth as a proxy The Brazilian market is large: population is 211 million in 2021, making Brazil the 6th most populous country in the world after China, India, the United States, Indonesia and Pakistan 2.2.2 The stability of the economy Brazil has been a subject of interest in macroeconomic studies for several decades In the 70s, the country experienced a boom and was expected by some to grow to become the world's next economic power During this period, the country experienced a high annual growth rate However, in the early 80's, the economy was rocked by a debt crisis that resulted in reduced growth rates and sometimes negative growth During the 1980s, the Brazilian economy experienced a severe recession due to a severe debt crisis, which resulted in unstable and sometimes negative growth rates in the 80s and 90s In 1996, the dong New Real money was introduced and the economy improved, although affected by the economic crisis of 2008-2009 when the growth rate fell along with the rate of many other countries at the time h GDP GROWTH (ANNUAL%) 10.00 8.00 6.00 4.00 2.00 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 (2.00) (4.00) (6.00) Year 2.2.3 Labor costs and productivity 17 Bài tập học phần Kinh tế Quốc tế GVHD: PGS TS Nguyễn Thường Lạng Brazil's average salary was 1,982 BRL in 2016 The salary of highly skilled workers was 4,100 BRL, production workers earned an average of 2,010 BRL and low skilled workers were 1,200 BRL per month In recent years, wages have risen and inequality between income groups has decreased Wages are also higher in metropolitan areas such as São Paulo and Rio De Janeiro As labor costs are an important factor in both the resources and markets for which FDI is sought, it is perhaps more important that in labor-intensive industries such as manufacturing, the host country compared to other countries How different is the labor cost is very important A report conducted by the Boston consulting group compared manufacturing costs in the world's top 25 exporting countries in 2004 versus 2014 The study compared 25 countries in terms of labor costs, costs, and costs electricity and production costs natural gas as well as the exchange rate against the US dollar Brazil has shown a strong increase during this period, from one of the lower cost countries in 2004 to one of the more expensive in 2014 2.2.4 Business environment h Brazil's business environment is known to be quite good for foreign investors as the government in general does not make any distinction between Brazilian and foreign companies in terms of rules and regulations Some industries are regulated for foreign investors such as healthcare, mass media, telecommunications, maritime, aerospace and air transport On the other hand, there are sectors that are sought after and encouraged for investment such as automotive, renewable energy, life sciences, oil and gas and transportation infrastructure In these cases, there are more favorable conditions for investment as it will spur innovation and hopefully spur growth For example, the average cost of opening a business in Brazil is quite low However, there are aspects that act as barriers when opening and operating a business in Brazil For example, the time it takes to open a new business can be seen as a barrier: the process takes 80 days on average in Brazil (the world average is 21 days) 2.2.5 Tax preferences There are incentives that the government in Brazil offers to foreign investors in the country These incentives depend on the location and industry of the 18
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