Caribbean and Latin America receive largest FDI to date

ECLAC estimates that, in 2012, the FDI flows to Latin America and the Caribbean will maintain high levels.

BRIDGETOWN, Barbados, Thursday May 17, 2012 -  Latin America and the Caribbean received 10% of the total global flows of foreign direct investment (FDI) in 2011, equivalent to US$153.448 billion.

According to a report presented recently by the United Nations (UN) agency the Economic Commission for Latin America and the Caribbean (ECLAC) in Santiago, Chile, this the largest amount of FDI ever received by the region. Prior to this, the highest record had been registered in 2008, when investments amounted to US$137.001 billion.

As stated in the report entitled Foreign Direct Investment in Latin America and the Caribbean 2011, in 2010, the region received US$120.880 billion, whereas in 2009, due to the international economic crisis, investments decreased to US$81.589 billion.

In the Caribbean in 2011, inflows soared by 20% compared to the previous year, with the Dominican Republic at the head with US$2.371 billion.

Overall, the main foreign direct investment recipients in the region were Brazil (US$66.660 billion, representing 43.8% of the total of flows into the region), Mexico (US$19.440 billion), Chile (17.299 billion), Colombia (US$13.234 billion), Peru (US$7.659 billion), Argentina (US$7.243 billion), Venezuela (US$5.302 billion) and Uruguay (US$2.528 billion). Of these countries, Brazil, Chile, Colombia, Peru and Uruguay reached historic records.

In Central America, FDI incomes increased by 36% compared to 2010, where the amounts received by Panama (US$2.790 billion), Costa Rica (US$2.104 billion) and Honduras (US$1.014 billion) stand out.

"In spite of the prevailing uncertainty in global financial markets, Latin American and Caribbean economies attracted important amounts of foreign direct investment during 2011. These amounts should remain high in 2012," stressed the Executive Secretary of ECLAC, Alicia Bárcena.

In 2011, 46% of the net income deriving from FDI was due to profit re-investments, whilst the remaining percentage was due to capital contributions and loans among companies. According to ECLAC, this denotes the trust of transnational companies in the region and important business opportunities within it.

As shown in the report, this tendency, which started in 2002, is a result of the amount of assets accumulated by transnational companies in the region and an increase in their profitability due to the good economic performance of the countries and to high international prices of exported raw materials.

However, since 2004, there has been growing repatriation of profits by transnational corporations investing in the region. "FDI revenue transferred back to the countries of origin has increased from US$20 billion per year between 1998 and 2003 to US$84 billion between 2008 and 2010 per year," noted Bárcena.

Also, the document points out that the majority of the FDI were directed toward manufacturing, services and to natural resources.

"In this context, it is urgent to promote policies to guide FDI and leverage its potential benefits, among which are the knowledge and technological exchange and the increase of local capacities by strengthening national innovation systems, creating production chains, building human capacity and fostering local entrepreneurial development," emphasized the UN official.

The ECLAC report shows that the European Union (EU), as a bloc, is the largest investor in Latin America and the Caribbean. In the last decade, the EU invested an average of US$30 billion per year in the region, representing 40% of the total received. European investments, which have been mainly directed to South America, are widely diverse and strongly relevant to strategic sectors such as electricity and banking.

Among the main investors in 2011, the United States (18%), Spain (14%), the Latin American and Caribbean region itself (9%) and Japan (8%) - among others - stand out.

ECLAC estimates that, in 2012, the FDI flows to Latin America and the Caribbean will maintain high levels. Nevertheless, the Organization warns that if the crisis in the eurozone worsens, the flow of investments -especially those coming from Europe- could be reversed.

Due to this uncertainty and to the attractive position of Latin America and the Caribbean to transnational companies, the Organization anticipates that inflows to the region deriving from FDI in 2012 will vary between -2% and 8% compared to inflows in 2011. Click here to receive free news bulletins via email from Caribbean360. (View sample)