Latin America: Pre-Pandemic Investment Slump

According to a report that was published on Tuesday in Santiago by the Economic Commission for Latin America and the Caribbean, Foreign Direct Investments (FDI) in Latin America continue to remain below the levels recorded before the COVID-19 epidemic, despite the growth of 40.7% from 2021. (ECLAC).

According to the report published by ECLAC, “this weak recovery shows how difficult it is for the region as a whole to reposition itself as an attractive destination for the establishment of new operations of transnational companies after the end of the boom cycle of the price of raw materials and (of) high growth rates.” “This weak recovery shows how difficult it is for the region as a whole to reposition itself as an attractive destination for the establishment of new operations of transnational companies.”

Additionally, the region’s share as a destination for global investments decreased, making up only 9% of the total. This is “one of the lowest percentages in the last ten years and a far cry from the 14% recorded in 2013 and 2014,” according to the report.

The projections are not in the least bit promising. In 2021, the region was given a total of US$ 142.794 billion in FDI, which is a 40.7% increase over the amount received in 2020. Despite this, these figures are still 9.55% lower than 2019’s total of 157.689 billion US dollars.

On the whole, Latin America and the Caribbean accounted for only 9% of total foreign direct investment (FDI), which is one of the lowest percentages recorded in the past ten years and is a significant drop from the 14% that was recorded in 2013 and 2014. According to the ECLAC document, one of its conclusions stated, “In other words, even if 2021 is considered a year of recovery, the trend of almost uninterrupted fall identified in Latin America and the Caribbean since 2012 is not modified; given the global outlook for 2022, it is possible that this fall will continue.” [citation needed] This trend of almost uninterrupted fall was identified in Latin America and the Caribbean since 2012.

According to what was stated in the study by ECLAC Executive Secretary José Manuel Salazar-Xirinachs, “in a region with low overall levels of investment, foreign direct investment is crucial for the creation of a productive policy.”

In 2021, the nations that received the highest foreign direct investment (FDI) were as follows: Brazil (33%), Mexico (23%), Chile (11%), Colombia (7%), Peru (5%), and Argentina (5%).

In addition to Brazil, which always has a high incidence due to the size of its economy, the high growth of FDI in Chile (66%) and Peru (919%) in South America and Guatemala (273%) and Panama (163%) in Central America explained most of the variation year on year, according to ECLAC. These countries are located in Central America.

The United States and the European Union were the most significant contributors to the total investment, accounting for 36% and 34% of the total, respectively. In the meantime, the number of mergers and acquisitions saw a 33% increase, which is still “one of the lowest levels of the decade.”

ECLAC made the observation that “in a global climate in which mergers and acquisitions rose very dramatically,” the area had just recently recovered from the downturn that had happened in the year 2020.

The refining of oil, as well as the production of electricity and gas, water, and telecommunications, are particularly appealing to investors from other countries.

Guyana did the same thing in the Caribbean, with the arrival of the oil capital, surpassing the Dominican Republic, which had been the leader in previous years. In Central America, Costa Rica was the leading recipient of foreign funding for the second year in a row, while in the Caribbean, Guyana did the same thing. The “large-scale acquisition” that Guatemala made in the field of telecommunications was another topic of discussion.

It is necessary to articulate productive development policies with the attraction of high productivity investments, in activities that support virtuous development processes in terms of inclusiveness, employment quality, environmental sustainability, innovation, and technological complexity, Salazar-Xirinachs also said. “To achieve a positive impact of Foreign Direct Investment, it is necessary to articulate productive development policies with the attraction of high productivity investments,” she said.

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