São Paulo – In 2013, Latin American countries were targeted by a combined US$ 184.9 billion in foreign direct investment (FDI), according to the report “Foreign Direct Investment in Latin America and the Caribbean in 2013,” issued this Thursday (29th) in Santiago, Chile, by the Economic Commission for Latin America and the Caribbean (Eclac). According to the document, investment volume in the region was up 5% from 2012.
The Eclac survey shows that Brazil saw the highest influx of investment in Latin America. The country received 35% of total FDI inflows to the region in 2013, or US$ 64 billion, down 2% from 2012.
Mexico ranked second at US$ 38.2 billion. FDI inflows to the country doubled in 2013 as a result of the acquisition of the Mexican brewery Modelo by the United States’ Anheuser-Busch, which is controlled by the Belgian-Brazilian Ab-Inbev.
FDI amounted to US$ 20.2 billion in Chile, down 29%. FDI in Argentina was down 25% to US$ 9 billion. Peru received US$ 10.1 billion, down 17%.
However, investment flows were up 86% to US$ 112 million in Suriname; up 61% to US$ 4.6 billion in Panama; and up 35% to US$ 2 billion in Bolivia. In Colombia, investment stood at US$ 16.7 billion, up 8% from 2012. The sectors with the highest increments in influx were services, up 38%, manufacture (36%) and natural resources (26%).
Eclac executive secretary Alicia Bárcena said foreign investment remains concentrated within the region’s larger economies, but remarked that foreign money influx is more important to the smaller economies.
She also said Eclac is expecting FDI flows to the region to decline this year. According to Bárcena, FDI may range from a 1% increase to a 9% decrease in 2014. “This is a year in which investors will make decisions with regard to sectors in which to invest. It will be a year of many decisions,” she said.
Chile, for instance, is attracting the interest of solar energy companies which, according to Bárcena, regard the country as having a good business environment. The document also indicates that the Atacama Desert boasts the region’s highest solar radiation rates.
As per Eclac’s report, the European Union was the leading investor into Latin America, especially the Netherlands and Belgium. In a breakdown per country, the United States was the leading investor into the region. Bárcena said China steadily invests approximately US$ 10 billion per year in Latin America.
The Eclac executive secretary noted that over the past few years, investment from automakers in Latin America has grown, particularly in Brazil. Multinational corporations have announced new plants for the next few years. “Brazil is experiencing a new wave of automotive investment with the arrival of new players, some of them Chinese,” she said.
According to her, the Eclac believes that over the next few years, investment should concentrate into the extraction and processing industries, due to the vast amount of natural resources available in the region. Bárcena observed, however, that foreigners are also looking to invest in sustainable economy-related areas.
Growth of trans-Latin companies
The Eclac survey also notes that foreign investment by ‘trans-Latin” companies, i.e. transnational companies based in the region, as well as in other emerging countries, is increasing. “Just ten years ago, most of the translational companies in the world had their origins in developed countries, but that started to change in 2003. China, Russia, Brazil, Chile and Malaysia have played a much more important role since 2003. In this decade, foreign investment by these enterprises has soared, amounting to nearly US$ 400 billion, i.e. roughly 35% of the global total,” said Bárcena.
The organization believes the presence of Brazilian transnational companies in other countries is stronger than that of companies based in other Latin American countries, since Brazil provides incentives for businesses to invest abroad. The Eclac joint executive secretary Antonio Prado mentioned that the Brazilian Development Bank (BNDES, in the Portuguese acronym) offers credit for foreign investment.
“Brazil is interested in joining the global players, and hence the BNDES provides incentive. The bank goes about it in various ways, including financing to exports and services, typically for construction companies that bid in international tenders, as well as direct loans and acquisition of stakes in industries such as beef and wood pulp,” he said.
Bárcena also said the public sector and local companies account for the lion’s share of job creation in Latin America. However, she remarked that transnational companies have higher productivity and pay better wages.
*Translated by Gabriel Pomerancblum
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