Foreign Direct Investment on Downward Spiral Throughout Latin America: Report

This outcome is largely due to lower investment in sectors linked to natural resources, mainly mining and hydrocarbons, and to the deceleration of economic growth in Brazil.

The influx of foreign direct investment (FDI) in Latin America declined 9.1% to $179 billion in 2015, according to data released by the Economic Commission for Latin America and the Caribbean (ECLAC), a regional arm of the United Nations.

This outcome is largely due to lower investment in sectors linked to natural resources, mainly mining and hydrocarbons, and to the deceleration of economic growth in Brazil, the region’s biggest economy.

The UN agency has urged regional countries to reverse this trend by diversifying their economies and boosting innovation, warning that FDI could decline as much as 8% this year.

In Mexico, FDI increased by 18% last year, reaching nearly $30.3 billion, one of the highest levels in seven years. This was mainly due to the telecommunications and manufacturing sectors, particularly automotive.

Chile and Colombia experienced a negative FDI inflow due to the decline in mineral prices, falling 8% to $20.5 billion and 26% to $12.1 billion, respectively.

Central America received more than $11 billion in FDI in 2015, a 6% increase year on year. The biggest recipient was Panama, whose FDI income accounted for 43% of the region’s total. Panama is followed by Costa Rica with 26%, and Honduras and Guatemala, both with 10%.

In Brazil, FDI shrank 23% to $75 billion, although it continued to be the top recipient in the region. Corruption scandals, political instability and lower demand for commodities are the factors plaguing the Brazilian economy. Meanwhile, FDI in the Caribbean declined 17% to $5.9 billion.

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The report highlights that mining sectors are no longer attracting big foreign investment, but sectors such as automotive, telecommunications, renewable energy and retail commerce are showing new dynamism.

“Investments in renewable energy and other environmental projects are the basis of ECLAC’s proposal for boosting the region’s development with an environmental ‘big push,’ to move towards a pattern of low-carbon production, energy and consumption,” said Alicia Bárcena, ECLAC’s Executive Secretary.

FDI outflows from the region also declined substantially, to $47 billion in 2015, down 15% from the year before, with Chile turning out to be the biggest investor abroad.

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