Latin America, Caribbean receive record foreign investments

A record $173.36 billion of foreign direct investment went to Latin America and the Caribbean in 2012. Despite a shrinking of FDI capital flows worldwide, investments into the region increased by 6.7 per cent from 2011, according to the United Nations Economic Commission for Latin America and the Caribbean. 

While most of the investment flows were directed toward the exploitation of natural resources in South America, FDI inflows to the Caribbean rose for the third year in a row. However, they failed to reach the record levels of 2008.  

The main recipient in the Caribbean was the Dominican Republic, with inflows swelling by 59 per cent in 2012 to $3.61 billion. Foreign investments into Jamaica recovered from a record low in 2011, but still remained low at $381 million. 

Data for the Cayman Islands is skewed due to its status as offshore financial centre and thus was not included. 

The ECLAC noted FDI is increasingly focused on the exploitation of natural resources, particularly in South America. Manufacturing represents a fairly low proportion of inward FDI, except in Brazil and Mexico.  

Brazil remains the main recipient of FDI, despite the slight 2 per cent decrease recorded in 2012, when it received $65.3 billion dollars – or 41 per cent of regional inflows. In 2012, the largest increases were represented by Peru, which received $12.2 billion, and Chile ($30.3 billion), the second largest recipient of FDI. 

Other countries that posted higher figures than in 2011 were Argentina (27 per cent), Paraguay (27 per cent), Bolivia (23 per cent), Colombia (18 per cent) and Uruguay (8 per cent).  

Alicia Bárcena, executive secretary of the Economic Commission for Latin America and the Caribbean, said the foreign direct investment results attest to the good performance of the Latin American economy.  

“However, we see no clear signs of FDI making a relevant contribution to generating new sectors or creating activities with a high technology content – as changing the production structure is one of the main challenges facing the region,” she said. 

In Central America, the most striking results in positive growth from the previous year were in El Salvador (34 per cent), Guatemala (18 per cent), Costa Rica (5 per cent), Honduras (4 per cent) and Panama (10 per cent), which remains the subregion’s main recipient. Meanwhile, Mexico’s figures were much lower than in 2011, and this is largely attributable to the $4.1 billion dollar flotation of 25 per cent of the subsidiary of Spain’s Santander bank. Other countries that experienced falls in 2012 were Ecuador, Venezuela and Nicaragua. 

The profits of transnational enterprises operating in Latin America and the Caribbean grew fivefold in nine years, rising from $20.4 billion in 2002 to $113.1 billion in 2011. On average, transnational enterprises were repatriating a slightly higher proportion of profits to their parent companies (55 per cent) than they were investing in the countries of the region where they were generated (45 per cent). 

The United States and European Union countries remain the main investors in Latin America and the Caribbean, with Canada and Japan also making significant contributions. Having said that, 2012 saw a dramatic rise in the proportion of FDI from the region’s own countries (14 per cent of the total). 

The ECLAC predicts that this year’s FDI inflows to the region will range between a fall of 3 per cent and a rise of 7 per cent. 

A high percentage of the investment received cannot be attributed to any particular economy because of the increasingly common practice of transnationals channelling their investment abroad through subsidiaries in third countries, the ECLAC noted. 

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