Internationalization and Investment Attraction

Berlim, 25 de fevereiro de 2020

Internationalization and Investment Attraction

I. The internationalization of companies and investment attraction are two sides of the same coin.

The “heads” refers to attracting foreign capital to Brazil, while the “tails” refers to establishing Brazilian-owned companies abroad.

Both are measures aimed at promoting the business environment in a macroeconomic context. However, internationalization still seems to suffer the fate of Cinderella when compared to its more glamorous stepsister, investment attraction.

Apparently, the internationalization of Brazilian companies has not been properly perceived or recognized as a factor of national development in Brazil. One example can be seen in Germany, where the internationalization of companies has contributed substantially to economic success. Likewise, the internationalization of Brazilian companies can be understood as a determining factor for Brazil’s integration into global value chains.

The fact is that, for many years, the focus in Brazil has been almost exclusively on attracting investment. This narrative suggests that foreign companies and investors will bring development, generate jobs, pay taxes, and contribute to regional and national growth.

Historically, this has often been the case. Examples include the extraction of brazilwood, the coffee industry, mining, Ford’s rubber extraction plans in the Amazon, the automotive industry in São Paulo’s ABC region, and foreign investments during the economic boom of the 1960s and 70s. All of these, in a way, reinforced the narrative of investment attraction and contributed to Brazil’s extractive economic profile.

Even today, many Brazilian politicians measure their success by their ability to attract investments—something often highlighted in international forums such as Davos. As a result, investment attraction continues to dominate efforts, often at the expense of policies that support the internationalization of Brazilian companies.

II. And what about the internationalization of Brazilian companies?

Until relatively recently (particularly before trade liberalization under President Fernando Henrique Cardoso), it was practically nonexistent, with only a few exceptions. How many Brazilian multinational companies can you name off the top of your head? Likely not many.

Studies by Fundação Dom Cabral (FDC) since 2006 still show modest numbers—everything remains in an early stage.

The main target for Brazilian companies’ internationalization continues to be the United States, followed by South America and then Europe. With the ratification of the EU–Mercosur agreement, Europe will likely gain greater importance. The European environment also appears more stable and predictable than the U.S., which has been affected by trade tensions with China.

Language barriers may still intimidate Brazilian entrepreneurs, but in international business environments, this is largely a manageable issue. The European common market is clearly an excellent alternative to the American market.

III. Why is internationalization important?

Because it is the only way Brazil can truly integrate into global value chains. This is not an abstract concept.

Governments do not create economies—markets do. Therefore, Brazil’s integration into global value chains depends on the presence of Brazilian companies and entrepreneurs in international markets.

To achieve this, Brazil needs a new generation of multinational companies with physical operations abroad.

The country can support entrepreneurs through appropriate economic policies and tax regulations that encourage internationalization. Businesses must be able to rely on public sector support—something that has historically been insufficient.

There are also misunderstandings about what internationalization actually means. A Brazilian company that exports is not necessarily internationalized—it is simply a domestic exporter. Such companies supply global value chains but are not truly integrated into them.

Only when companies establish their own structures abroad can they be considered fully internationalized multinational enterprises.

IV. Why do we need to integrate Brazil into global value chains?

Because maintaining the current situation is not viable. The consequences are visible in Brazil’s low international competitiveness and limited profitability across industries. This leads to the so-called “Brazil cost” and exclusion from global value chains.

Many companies that operated solely in the domestic market suffered severely during recent economic crises, with some forced to shut down. Internationalization allows companies to offset domestic downturns through operations abroad.

In a globalized world, protectionism and import substitution policies are no longer sustainable long-term strategies. There is still time, but if Brazilian industry does not move into international markets, those markets will come to Brazil with force.

Free trade agreements—such as the EU–Mercosur deal and Brazil’s growing commercial ties with the United States—will intensify competition. This will bring more foreign multinationals and cheaper products into the domestic market, effectively ending the comfort zone for Brazilian businesses.

V. Why is internationalization still undervalued?

There are several possible reasons. One is that internationalization lacks the “headline appeal” of investment attraction. Politicians may not prioritize it because it does not generate the same immediate visibility with voters.

What is often overlooked is that internationalization strengthens domestic employment, increases competitiveness, boosts exports, raises GDP, and enhances technological capabilities. It is, in fact, a key driver of national development and wealth creation.

From a business perspective, the culture of strategic internationalization in Brazil is still underdeveloped. Companies have traditionally focused on the domestic market, and only recent economic crises have exposed the risks of this approach.

VI. What should be done?

Internationalization must begin with the entrepreneur. Companies need to allocate resources and treat it as a strategic priority.

A strong domestic foundation is essential before expanding internationally. Without it, successful internationalization is unlikely.

Results do not come overnight—companies need solid products, planning, financial resilience, and perseverance. However, the benefits are clear, including increased profitability through participation in global value chains.

So, the question remains: what are you waiting for to internationalize your company? The comfort zone of the domestic market is over—either you enter the global market, or it will come to you.

Paulo Henrique Boelter – IBREI International Representative in Berlin