THE United Nations Conference on Trade and Development (UNCTAD) has reported that Guyana’s Foreign Direct Investment (FDI) for last year stands at US$165 million, compared to US$154 million in 2010. The ranking of economies in UNCTAD’s FDI Attraction Index, has seen some significant changes in 2011. The top performers – Hong Kong, China; Belgium; Singapore; and Luxembourg – are fixed features at the top of the list, with high absolute inflows because of their attractive investment climates
The “above-potential” economies include, again, resource-rich countries that – even though the Potential Index takes into account the presence of natural resources – exceeded expectations. They also include small economies, where single large investments can make a big impact on performance in attracting FDI (and, more importantly, on their economies) or that have created specific locational advantages, either in the investment or tax regime or by providing access to larger markets.

Among these countries is Guyana which is listed in the third highest grouping of countries that are listed “above expectations”. In this category, Guyana ranks above countries such as Portugal, Denmark, Jamaica, Pakistan, Trinidad and Tobago, Ecuador, Greece, New Zealand, Australia, Brazil, China, Colombia, United Kingdom, Canada, France, Germany, Hungary, India, Spain, Thailand, Turkey, United Arab Emirates, United States, Japan, and Venezuela.

FDI
Foreign direct investments are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. This series shows net inflows (new investment inflows less disinvestment) in the reporting economy from foreign investors, and is divided by GDP.

Guyana’s International listings
The country’s most important sectors, were listed as sugar, rice, shrimp, timber, bauxite and gold, accounting for more than 70% of export earnings.
Guyana’s economic freedom score is 51.3, making its economy the 137th freest in the 2012 Index. Its overall score is 1.9 points higher than last year, with score increases in freedom from corruption and government spending partially offset by declines in business freedom and financial freedom.

Moving up
Nevertheless, Guyana recorded one of the 20 largest score improvements in the 2012 Index and is no longer considered one of the least free in the Index. To sustain and capitalize on such growth in economic freedom, enhancements in the foundations of economic freedom have become more critical.
The government acted positively to improve the management of public finances and the economy continues to generate strong growth, with GDP growth of 5.4% in 2011 and projected to 4.1% in 2012.

Budget Cut
The opposition parties, the Partnership for National Unity and the Alliance for Change (APNU-AFC) pressed for a cut of $18.5B in the budget (proposed expenditure of G$189 billion and revenue of G$146 billion) presented on March 30, 2012 by the PPP-Civic, The proposed cut provided for lower subsidies to a number of institutions and a reduction in capital expenditures. It could also result in job losses in the government.
Nevertheless, the foreign exchange position was sound with substantially higher inflows of foreign direct investment (FDI) and remittances. Thus, the foreign exchange market and exchange rates were relatively stable.

Projected FDI growth
The UNCTAD report has predicted slower international FDI growth in 2012, which will largely depend on the value of cross-border mergers and acquisitions (M&As) and Greenfield investments. While these dropped in the first five months of 2012, longer-term projections show a moderate but steady rise, with global FDI reaching US$1.8 trillion in 2013 and US$1.9 trillion in 2014, barring any macroeconomic shocks.
The report stated that FDI inflows to developing countries, increased by 11 percent, reaching a record US$684 billion. UNCTAD has projected that these countries will maintain their high levels of investment over the next three years.

South America leads
South America was the main driver of FDI growth in Latin America and the Caribbean. The pattern of investment by traditional investors shows that South America is the main driver of FDI growth to the region.
While FDI flows to Latin America and the Caribbean increased by 16 per cent to a record
$217 billion in 2011, mainly due to increased inflows to South America (up 34 per cent), inflows to Central America and the Caribbean, increased by only 4 percent.
The high growth of FDI in South America was mainly due to its expanding consumer markets, high growth rates and natural-resource endowment. In 2011, Brazil remained by far the largest FDI target, with inflows increasing by 37 per cent to $67 billion – 55 percent of the total in South America and 31 per cent of the total in the region.
Another important driver for FDI growth to South America has been the relatively high rate of return on investments in the region. Since 2003, South American countries have witnessed significant growth of income on FDI: from an annual average of $11 billion during 1994–2002, equivalent to 0.84 per cent of the subregion’s GDP, to an annual average of $60 billion during 2003–2011, equivalent to 2.44 per cent of GDP. In 2011, FDI income increased another 17 per cent, reaching $95 billion. (GINA)