Six countries captured 84% of foreign investment last year in LatAm

Foreign direct investment (FDI) towards Latin American countries had a good recovery in 2021, as it happened throughout the world, after the worst months of the covid-19 pandemic, according to the most recent report from the Economic Commission for Latin America and the Caribbean (ECLAC).

The region, as a whole, received US$142.79 billion, that is, 40.7% more than in 2020.

However, unlike what happened in the other regions, “this growth was not enough to reach the investment levels prior to the pandemic,” ECLAC said in its report.

Globally, FDI inflows increased by 64%, totaling US$1.58 trillion, a figure that exceeded the income received in 2018 (US$1.44 trillion) and 2019 (US$1.48 trillion).

One of the reflections of this progressive decline is that FDI inflows weighed 2.9% on LatAm’s Gross Domestic Product, a figure that is below the 3.5% observed in the 2010s.

And although the recovery was consolidated, there were six nations that stood out in receiving foreign investment, attracting 84% of the total in the region, with Brazil in the lead (33% of the total), receiving US$6.44 billion. Mexico (23%), Chile (11%), Colombia (7%), Peru (5%) and Argentina (5%), continued the ‘Top 6’.

Along with this, the UN organization pointed out that the behavior of FDI in four countries was the explanation for the greater interannual variation in the region. Among them are Chile, where FDI grew 66% from 2020 to 2021, Peru (919%), Guatemala (273%) and Panama (163%).

FOREIGN INVESTMENT ACTORS IN LATAM

For the last year, ECLAC said, the European Union had a greater participation in FDI from Latin America than the United States, with 27% of the former compared to 17% of the latter.

The text indicated that services were the second sector that showed the highest growth (39%) in the investment resources that arrived, a trend that was observed in all the countries analyzed.

For its part, in the manufacturing sector, the drop in FDI inflows in 2021 (-14%) is explained by the decrease in investment in manufacturing in Brazil. “There, in most manufacturing activities, less FDI was received than in 2020, with some exceptions such as the food and beverage sector and the automotive industry,” said ECLAC.

WHAT HAPPENED TO MERGERS AND ACQUISITIONS?

The UN body pointed out that in 2021, as FDI increased, mergers and acquisitions grew by 33%, but it remains one of the lowest levels of the decade.

“In a global context in which mergers and acquisitions grew significantly, in the region they only recovered from the drop that occurred in 2020. The interest of transnationals in acquiring assets in the region in 2021 has focused on the electricity, gas and water, telecommunications and oil refining sectors,” the text specified.

FDI RECOVERY HAS OBSTACLES

ECLAC assures that under a scenario of economic slowdown it is difficult to foresee whether the recovery of global investment flows that was observed in 2021 can be sustained.

“The war in Ukraine added new challenges to the impacts that the pandemic had had on global value chains,” the report says.

The agency points to inflationary pressures as one of the reasons that may affect the sustained recovery of the inflow of resources from FDI in the region, at the same time that disruptions have spread to the oil, gas, aluminum and cereals, as well as the sectors that produce inputs for agriculture.

Even when considering the participation of inflows in Latin America and the Caribbean in the world total, it can be observed that in 2021 the region received 9% of FDI, one of the lowest percentages in the last ten years and far from 14% that was registered in 2013 and 2014, they added.

With information from Bloomberg Línea