ECLAC: Foreign direct investment in Latin America falls to levels of ten years ago due to pandemic | Economy

Foreign direct investment in Latin America and the Caribbean in 2020 was the lowest in more than a decade, due to the economic crisis generated by the covid-19 pandemic, the Economic Commission for Latin America reported on Thursday. and the Caribbean (Cepal). The region received 105,480 million dollars, estimated the multilateral, a decrease of 34.7% compared to 2019. This figure represents a decrease of 52% compared to the historical maximum reached in 2012.

For Latin American countries to regain their appeal for transnational corporations, they must increase public investment, said Alicia Bárcena, executive secretary of the Chile-based organization. Rising international prices for raw materials, such as copper and agricultural products, could be a bad incentive that, in the long run, would not provide Latin America with jobs and sustained economic growth.

The decline in the Latin American region is in line with what is observed in the world. In 2020, the contraction in foreign direct investment, which is characterized by commercial and not just financial objectives, was 35% worldwide. “This is the lowest level we have seen since 1998,” Bárcena said during a virtual press conference from Santiago.

In the first year of the pandemic, transnational corporations focused on strengthening their value chains so that they could prevent future disruptions such as those caused by landfills. This has resulted in reduced investments for most Latin American countries except Mexico, Paraguay, Ecuador and the Caribbean islands of Barbados and the Bahamas. Generally speaking, the trend in 2020 was to invest in developed countries. Mexico, Bárcena pointed out, showed positive behavior with an increase of 6.6% between 2019 and 2020.

“Mexico has managed to attract a significant amount of foreign investment”; says the annual report Foreign direct investment in Latin America and the Caribbean 2021, published Thursday. “In these results, a very important factor was the ratification of the treaty between the United Mexican States, the United States of America and Canada,” he adds.

All components of foreign direct investment have suffered the impact of the pandemic, the secretary said. “Affected by the closure of activities, it is very difficult for foreign direct investment to become a driver of recovery if we do not do things quickly,” Bárcena said. “Investments by transnational corporations have been reduced and a tendency for investors to go to developed countries is increasing. And why? Because the developed countries have sent very clear signals of public investments which will go to strategic sectors such as infrastructure, energy or environmental sustainability ”.

Economic recovery in Latin America will be partial, ECLAC said. It is estimated that the gross domestic product (GDP) will recover 5.2% and in 2022 and 2.9%. “This will not be enough to recover investment or employment levels,” Bárcena said. “The investment, the total, is what has fallen the most in our region.

“We are concerned that the increase in commodity prices and demand in 2021 will encourage the reprimarization of our economies, and, as we already know, that this model does not guarantee sustained growth, higher productivity or more jobs and further deterioration of the environment. ” He added.

“What must the region do to face a process of profound transformation? Specify the strategic recovery and investment plans associated with dynamic sectors towards great environmental momentum. If we don’t, foreign direct investment will go to Europe, North America and some Asian countries, ”he added.

Bárcena called for the creation of a multilateral regulatory framework that protects investments that contribute to development, such as the negotiations currently underway in the World Trade Organization. “Our region has been more focused on protecting investors no matter what, no matter if they damage jobs or the environment, whether they bring in capital, well, no it’s not. the.”

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