LatAm outbound investment reached a record high in 2022; Spain’s role

By Michelly Teixeira

International investment from Latin America reached record levels in 2022, some US$73.449 billion, 75% higher than a year earlier.

Brazil, Mexico, and Chile have accounted for nearly 80% of the region’s foreign direct investment (FDI) since the pandemic began, a percentage maintained last year.

The conclusions are drawn from the Global LATAM 2022 report, developed by ICEX-Invest in Spain in collaboration with the Ibero-American General Secretariat (SEGIB).

This behavior of investment abroad, which contrasted with the fierce and uncertain period worldwide, is explained above all by the reinvestment of dividends, according to the executive director of ICEX-Invest in Spain, Elisa García Grande, who also highlights “the health of the business fabric” of Latin America.

“Dividend reinvestment strengthens the commitment to countries and sectors in which it already has a presence but does not increase exposure to new technologies and capabilities or open new markets,” she says.

For Adrián Blanco Estévez, whose job at ICEX-Invest in Spain is to attract investment from Latin America, the region’s companies now have more attributes for internationalization.

“They are more competitive, solid, and innovative. In 2022, even with the complicated panorama in the markets, many companies in the region managed to capitalize, and companies in sectors such as agriculture and fuels benefited from the war in Ukraine,” the executive tells Bloomberg Linea.

Based on his market perception, Blanco Estévez adds that Latin American companies’ investment abroad in 2023 “certainly has a challenging environment, although the outlook is positive”.

SPAIN, THE GATEWAY TO EUROPE

Latin America is the leading recipient of Spanish capital: since 1993, the volume invested by Spain in the region has been US$148.22 billion, or 29.5% of the total.

And the country is also one of the main recipients of Latin American investment.

The report estimates that the accumulated Latin American investment in Spain since that year, when the historical series began, amounts to €68.361 billion, representing 11% of all foreign investment received by the Iberian country.

The investment commitment of Latin American capital to Spain, considered a natural gateway to the European market, continues and is reflected in the figures.

In 2022, 39 investment projects were announced in the European country by Latin American companies, compared to 24 in 2021.

By comparison, during the same period, investment plans announced by companies in the region amounted to nine in Germany, three in France, and one in Italy.

However, despite the increase in the number of projects, there was a decrease in the total amount.

Latin American countries invested €1.101 billion in Spain in 2022, almost 33% less than in the previous year.

This is partly explained by one-off corporate restructuring operations registered in 2021.

There was a substantial increase in the number of greenfield investment projects, particularly due to the arrival in Spain of SMEs and startups from the region, says SEGIB Secretary General Andrés Allamand.

THE BIGGEST INVESTORS

Since the pandemic began, 80% of all LatAm foreign direct investment in the world has come from three countries: Brazil, Mexico, and Chile.

Brazil, at the top of the list, invested 90% more in 2022 than the previous year: US$30.694 billion (40% of the total).

Mexico, meanwhile, recovered its traditional cross-border investment rhythm, multiplying the flow of investment by 50 to US$16.878 billion (25% of the total).

Conversely, Chile is the only country among the largest in the region that reduced its investment pace in 2022.

Concerning Latin American investment in Spain, Mexico ranks first (46.8% of the total), followed by Argentina (13.7%), Brazil (9.3%), Colombia (8.9%), Venezuela (8.2%) and Uruguay (4.9%).

GREENFIELD’S NEW INVESTMENT PROJECTS MOVED AS FOLLOWS

The number of projects amounted to 400 last year, far exceeding the figures for 2021 (339) and even for 2019 (394).

The sector with the most projects in 2022 was software and IT services, 108, almost double the number of projects earmarked for financial services (57), which ranked second.

MERGERS & ACQUISITIONS

As far as cross-border acquisition projects are concerned, 2022 proved particularly challenging.

According to the report, rising financing costs, liquidity constraints, exchange rate volatility, and uncertainty affected companies’ ability to pursue internationalization projects.

The value of M&A completed in the year was US$3.326 billion, 68% lower than in 2021 (US$10.289 billion).

As in the other areas, those showing the highest figures were Brazil, Mexico, and Chile, accounting for 85% of the value of mergers and acquisitions.

The other Latin American countries continue to prioritize investment in neighboring countries (40% of the total).

In 2022, only Panama and Peru joined the three as investors outside Latin America in this area, albeit marginally.

The other priority destinations are the United States and Europe (27% and 23%, respectively).

“Interestingly, contrary to what might be expected, investment in the United States came mainly from Brazil and Chile, while Mexican investment went to Europe,” says the Global LATAM 2022 report.

Brazilian companies were the most active companies in cross-border acquisitions, with 19 operations in 2022.

The largest operation of the year totaled US$1.2 billion and had as buyer J&F Mineração, which acquired from Vale the mining companies, also Brazilian, Mineração Corumbaense Reunida and Mineração Mato Grosso, in addition to buying the Panamanian International Iron Company and the logistics company Transbarge Navegación, in Paraguay.

With information from Bloomberg

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