Agriculture and construction have driven the growth of investments between 2019 and 2021 in the country. An exclusive study by Fipe’s Center for Capital Market Studies (Cemec-Fipe), linked to the University of São Paulo, found that the two industries accounted for two-thirds of investments in machinery and equipment between 2019 and 2021. During the period, the country faced the first year of the pandemic, the recovery after the height of the crisis and the slowdown of this recovery over the past year.

The concentration helps explain the expansion of investments even in an unfavorable macroeconomic context, said Carlos Antonio Rocca, the coordinator of Cemec-Fipe, who led the study.

“Some key factors for investment decisions are not encouraging. The recovery of the economy has lost steam, the growth expectation for the next three years is the lowest since 2006, and we also have uncertainty. But we investigated who has driven the increase in investments and we found that this came mainly from agriculture, with the good performance of commodities, and from construction, with interest rates still relatively low,” he said.

The study was motivated by the assessment that the growth of investments in the period was “somewhat surprising” since the country has high levels of idle capacity, there is a continued reduction in growth expectations for the coming years and uncertainty remains high, Mr. Rocca said.

Statistics agency IBGE detected investment rates of 15.5% in 2019, 16.6% in 2020 and 19.2% in 2021. The study by Cemec-Fipe excludes 2020 to avoid specific effects of the first year of the pandemic and directly compares the variation between 2019 and 2021, which were more typical years.

To understand the origin of this investment expansion, however, Mr. Rocca takes into account work done by economist Gilberto Borça Jr. showing that the investment rate actually achieved 18.2% in 2021, compared with 16.2% in 2019.

This finding excludes two factors that affected investments in the period. The first is the change in relative prices between the capital goods that make up the gross fixed capital formation (GFCF) and the prices of service goods that make up the GDP, due to the increase in the exchange rate, which affects imported capital goods.

The second is the impact of the value of Petrobras’s rigs. A tax change – the end of Repetro, a special customs regime that eased imports of goods for oil exploration – caused investment to be driven by imports of capital goods recently.

“Even so, it was still a big growth in investments, of two percentage points. And when we look at GFCF data between 2019 and 2021, we see that the highlight is machinery and equipment and construction. From there, we looked at the production of machinery and equipment, and we saw this great weight of those linked to the agricultural sector and construction,” Mr. Rocca said.

Considering IBGE’s index of physical production of capital goods, the segments focused on agriculture grew above 40% in real terms (43.8% in agricultural and 47.8% in agricultural parts) between 2019 and 2021. Capital goods for construction, on the other hand, advanced 40.48%, considering the same base of comparison.

Thus, by the accounts of Cemec-Fipe, the production index of capital goods rose 14.8% between 2019 and 2021. Of this increase, 6.44 percentage points came from the agricultural segment and 0.91 percentage point from agricultural parts, totaling 7.35 percentage points, or almost half (49.7%) of the growth. Capital goods for construction, meanwhile, account for 2.47 percentage points, or 16.7% of the expansion. The weight is much higher than the industrial capital goods segments (only 1.01 percentage point), for instance.

“If you consider the agricultural segment and the agricultural parts segment, virtually 50% refers to machines for the agricultural sector. If you also consider construction, there are two thirds of the investments for these two segments,” Mr. Rocca said.

In addition to evaluating the impact of these segments in the growth of investment, the study also collects investment data from 472 public companies. According to the survey, agribusiness-related companies saw a 52% expansion of the GFCF indicator in the period (considering the evolution of the value of their assets), compared to a much lower rate (24%) for the average of public companies as a whole. The investment measure in this case considers the evolution of the value of assets in the financial statements, both fixed assets (such as real estate and machinery) and intangible assets (such as systems and software, for example), in nominal values.

“Agribusiness-related companies had much stronger growth in this measure of investments than the sample average. This reinforces the data we saw about the substantial growth of agricultural machinery. Public companies have a great weight in the economy, they account for a quarter of the added value, and show a general trend,” Mr. Rocca said.

Source: Valor International

https://valorinternational.globo.com