Latin America's FDI trending downward

By
Thursday, August 10, 2017

Dragged down by the impact of low commodities prices on investments in the natural resources sector, foreign direct investment declined 7.9% in Latin America last year to US$167bn.

An FDI study unveiled by Santiago-based Eclac on Thursday estimates a 5% drop in the region's FDI this year.

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Last year, Latin America received 10% of global FDI, down from a 14% average in 2011-14. Furthermore, the US$167bn in FDI was 17% below the region's 2011 high.

Not surprisingly, Latin America's biggest economy got the lion's share of investments. Despite its recession, Brazil recorded a 5.7% rise in FDI to US$78.9bn, which accounted for 47% of the region's total.

It was followed by Mexico with US$32.1bn, or 19% of the total, even though its FDI recorded a 7.9% drop. Colombia, which grew 15.9%, was third with US$13.6bn (8% of total). While Chile took in US$12.2bn (7%).

Broken down by sub-region, Panama obtained 44% of Central America's FDI, followed by Costa Rica (27%). In the Caribbean, the Dominican Republic brought in 49% of the funds, above Jamaica's 16%.

FDI in Latin America's natural resources sector fell to 13% of the worldwide total last year from an 18% average in 2010-15. New investments flowed to renewable energies, telecommunications and the auto sector, in which Latin America received 18%, 21% and 20% of global investments committed to those industries.

Chile and Mexico each received a third of the region's renewable energy investments. Overall, the sector received the most investments in new projects, accounting for 18% of the region's FDI.

It was followed by the telecom sector (14%), where the quickening pace of technological changes and competition among multinational operators has led to increasing investments. Global digital platforms have also invested in datacenters to provide cloud services in the region, including 16 projects for total investments of US$2.7bn.

"The big productivity gaps that persist in the region and the new technological scenarios that the fourth industrial revolution poses require new policies to harness the benefits of FDI in national processes of sustainable development," said Eclac executive secretary Alicia Bárcena (pictured) in a release.

The United States was once again the biggest individual investor, accounting for 73% of the FDI, followed by the European Union (53%). China was officially responsible for just 1.1% of FDI, but the figure underestimates the presence of Chinese capital in the region, Eclac said.

Meanwhile, FDI outflows from Latin American transnational companies, known as translatinas, fell 50% to US$24.6bn in 2016.