Sharp drop in foreign investments in Latin America: which are the only 5 countries in which they have developed

Foreign direct investment from Latin America and the Caribbean fell 34.7%, a loss of $ 56,000 million and the lowest level in a decade, according to a new report from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) presented this Thursday.

Specific, Foreign investment in the Latin American region was $ 105,480 million in 2020, which is equivalent to 2.5% of gross domestic product (GDP). By 2021, ECLAC estimates that foreign direct investment will increase by 10 to 15% globally. In Latin America, the projection ranges from a 5% decrease to an increase of 5%.

By region, the annual study Foreign direct investment in Latin America and the Caribbean 2021 underline that Central America assumed most of the investment losses, with a decrease of 89.4%, while in the Caribbean, the contraction was 25.5%.

For the Executive Secretary of ECLAC, Alicia Bárcena, the data represents a “big drop”, a trend that had already been declining since 2013.

“Foreign direct investment has made significant contributions in Latin America and the Caribbean, but there is no evidence that over the past decade it has contributed to significant changes in the productive structure of the region or which has served as a catalyst for the transformation of the productive development model, ”stressed Bárcena.

In this context, the executive secretary It is committed to a multilateral strategic approach to position the interests of the region and that investment flows contribute to sustainable development.

“Today, the challenge is greater because of the characteristics and scale of the crisis. We need to channel foreign direct investment into activities that generate more productivity, innovation and technology», Added Bárcena.

Investment only increased in five countries

Only in five countries did foreign direct investment increase compared to 2019, which was Bahamas, Ecuador, Barbados, Paraguay and Mexico. With this data, The Aztec country consolidated itself as the second recipient of foreign direct investment in the region behind Brazil, which suffered a 34% contraction in terms of foreign investment.

For its part, the natural resources and manufacturing sectors, with reductions of 47% and 38%, respectively, were the hardest hit in 2020. Renewable energies remain the sector in the region that arouses the most interest from foreign investors.

The United States increased its share of foreign investment in the region from 27% to 37% in 2020 due to the sharp drop in Europe (which goes from 51% to 38%) and Latin America (which goes from 10% to 6%).

The smaller decline of the United States as a source of investment flows is mainly explained by the increase in investment of this country in Brazil in 2020. On the other hand, flows from the two European countries which have invested the most in Brazil – the Netherlands and Luxembourg – decreased between 2020 and 2019, which led to a decrease in the weight of Europe as a investor in the region.

In 2020, the flows of transnational Latin American (trans-Latin) companies also decreased (-73%), although with a strong heterogeneity. Thus, while Chile and Mexico recorded an increase in the flow of direct investment abroad, Argentina, Brazil, Colombia and Panama recorded setbacks.

FDI drops by 35% worldwide

Overall, foreign direct investment fell by 35% in 2020, reaching around one trillion dollars (844,493 million euros), which is the lowest value since 2005.

However, the contraction of investment flows during the year 2020 was heterogeneous, since While the Latin America region suffered a 34.7% drop, China gained 6%, consolidating itself as the world’s largest investor and second-largest recipient. Likewise, 66% of the world’s investments went to developing economies.

Regarding investment projects, their value has been reduced by 35%. By sector, mining, petroleum and automotive were the most affected, as well as services, which also recorded declines (-25%) with sectoral differences.

According to the United Nations agency, the international context suggests that global investment flows will recover slowly.

On the other hand, the search for assets in strategic sectors of international reactivation and public projects of transformation of the productive structure (infrastructure, health industry, digital economy) indicates that A large part of these operations would be destined for Europe, North America and certain countries in Asia, increasing global asymmetries, the study warns.

With information from Europa Press

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