Brazilian-American Capital and Investment Exchange Analysis

36 FAQ About the GE Global Research Center An outcome of its regional growth strategy, GE recently opened its first Global Research Center in Latin America. Based in the city of Rio de Janeiro, the site hosts research in the areas of oil and gas, renewable energy, biofuels, health, aviation and railroad transport. Given the Center's importance, the company has doubled its planned investment in the facility, which will receive another R$1 billion by 2020, enabling it to accommodate 400 professionals. The Center already has 160 employees, including 90 researchers. GE is increasingly formalizing people's understanding of its contributions and positioning in certain strategic sustainability-related areas. The company has prioritized Latin America in the last two years. For example, in 2013 alone, it created 1,600 new jobs in the region, purchased US$2.6 billion in goods and services from Brazilian suppliers, invested US$250 million in R&D, and invested US$21 million in talent development. Its employees also spent more than 72,000 hours doing voluntary work in 2013, benefiting the communities surrounding GE's more than 40 industrial facilities across the American continent. I. How does foreign investment occur? Foreign investment may take place in the form of foreign direct investment (FDI) or portfolio investment. As defined by the Organization for Economic Cooperation and Development (OECD), FDI occurs when an investor demonstrates lasting interest in a destination country, by holding 10% or more of a company's common shares (voting shares), while holdings of less than 10% in a company are considered to be portfolio investment. II. How is FDI divided up in the balance of payments? Following the International Monetary Fund (IMF)'s new methodology, countries report their direct investment executed by their resident companies abroad and direct investment executed by foreign companies in their country in their balance of payments financial account. In addition, FDI is divided into two modalities: equity capital, and intercompany transactions. Equity capital encompasses FDI inflows related to the total or partial acquisition of the equity of resident companies. Intercompany transactions cover loans granted by parent companies, headquartered abroad, to their subsidiaries or affiliates in the country. III. What are the main forms of FDI inflows and outflows? FDI mainly occurs in four ways: greenfield projects and joint ventures, regarding new operations; and brownfield projects and reinvestment, regarding existing operations. The greenfield modality involves the establishment by a parent company of a new operation/subsidiary from scratch in the destination country. A joint venture involves the creation of a new operation by two or more companies. Brownfield projects are more related to equity investment through mergers or acquisitions, focused on existing operations. Reinvestment involves capital - generally profits - that are reinvested by a parent company in a subsidiary in the destination country. IV. What is the difference between FDI flows and stocks in a given country? 37

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