Foreign direct investment in Latin America fell 9.1% in 2015 to $179.1 billion; lowest since 2010.
Last edited Wed Jun 15, 2016, 07:09 PM - Edit history (1)
Foreign direct investment (FDI) inflows in Latin America and the Caribbean declined 9.1% in 2015 compared with 2014, totaling $179.1 billion, the lowest level since 2010.
The Foreign Direct Investment in Latin America and the Caribbean 2016 report, published by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) at its headquarters in Santiago, Chile, pointed to lower investment in sectors linked to natural resources (mainly mining and hydrocarbons) and to the deceleration of economic growth - above all in Brazil.
ECLAC estimates that in 2016 FDI will remain below the levels reached in recent years, in line with countries’ economic prospects. It could decline as much as 8% but will continue to be an important factor in the region’s economies, the Commission says.
The decline seen in 2015 in Latin America and the Caribbean contrasts with the dynamism observed at a global level, the document notes. Last year, global FDI flows expanded 36%, reaching an estimated total of $1.7 trillion; this expansion was mainly driven by an intense wave of transnational mergers and acquisitions focused on developed countries and the United States in particular.
Nevertheless, Latin America, with 8.6% of the world's population, received 10.6% of all recorded FDI inflows in 2015.
Figures varied widely by country. Brazil saw FDI shrink 23% to $75.1 billion, although it continued to be the top recipient of foreign investment in the region (with 42% of the total). Mexico, the second-biggest recipient, saw inflows increase by 18% - reaching $30.3 billion but well below the $45 billion record set in 2013. The manufacturing sector (mainly the auto industry) and telecommunications received the biggest foreign investments in that country.
The decline in mineral prices negatively affected FDI income in Chile (which declined 8.5% to $20.5 billion) and Colombia (which fell 25.8% to $12.1 billion). A sectoral study of these inflows show that in Colombia the participation of primary sectors - which includes mining - dropped from 51% in 2010-14 to 31% of the total in 2015.
FDI inflows into Argentina expanded by 130% to $11.7 billion. Much of the difference, however, was accounted for by the renationalization of 51% of the energy company YPF, carried out in 2012 and formally disbursed in May 2014 - representing a "divestment" of nearly $6 billion in the form of the government's payment for 51% of YPF stock to Madrid-based Repsol. Excluding this payment Argentine FDI inflows in 2014 reached $11 billion, resulting in a net increase in 2015 of 6%.
Central American FDI income increased 6%, totaling $11.8 billion. Panama, with 43% of the total, continues to be the main recipient in the subregion - followed by Costa Rica (26%), Honduras (10%) and Guatemala (10%). Meanwhile, foreign direct investment in the Caribbean declined 17% to $6 billion.
As far as medium- and long-term trends, the study highlights important changes in investment projects announced between 2005 and 2015: the relevance of mining and fossil fuel sectors has declined, the automotive sector has shown a special dynamism, and the importance of telecommunications, renewable energy, and retail commerce has increased.
At: http://www.cepal.org/en/pressreleases/foreign-direct-investment-towards-region-fell-91-2015-total-17910-billion-dollars
