Latin America, Caribbean received US$184.92 billion in Foreign Direct Investment in 2013
– a change in trend forecasted for 2014

LATIN America and the Caribbean notched a new historic high in 2013 upon receiving US$184.92 billion dollars in foreign direct investment (FDI), 5% more than in 2012 in nominal terms, the Economic Commission for Latin America and the Caribbean (ECLAC) informed yesterday.Global FDI flows climbed 11% in 2013 from the previous year, and Latin American and Caribbean participation in the world’s total stayed at 13%, said the report ‘Foreign Direct Investment in Latin America and the Caribbean 2013’, which was presented yesterday at the United Nations organisation’s headquarters in Santiago, Chile.

According to the report, FDI towards the Region has grown steadily since 2003, with the exception of 2006 and 2009, although in proportion to the size of the economies it has remained practically stable since 2011. This growth has been sustained by an increase in domestic demand and high prices for commodities exports.

In the last two years, the economic expansion has slowed and metal prices have fallen, which is why ECLAC forecasts that FDI flows will diminish slightly in 2014. Despite this, the organisation notes that transnational companies still show great interest in the Region’s long-term growth in consumption and in the exploitation of natural resources.

According to the study, 82% of FDI flows go to the Region’s six biggest economies, although in relative terms they have more impact in smaller nations, especially those of the Caribbean.

Brazil receives 35% of the FDI that comes to Latin America and the Caribbean: in 2013 the country attracted 64.046 billion dollars, slightly below the level seen in 2012. Mexico is the second-biggest recipient with 38.286 billion dollars in 2013, which was double the amount received in 2012 thanks to Anheuser-Busch Inbev’s acquisition of the Modelo beer company for US$13.249 billion dollars.

In 2013, the countries that received less foreign direct investment were Chile (-29%), Argentina (-25%) and Peru (-17%), while flows increased significantly to Panama (61%) and Bolivia (35%). Central America drew 21% more FDI than in 2012 while the Caribbean registered a 19% decline (due to a specific operation in The Dominican Republic).

“In the last decade, foreign direct investment in Latin America and the Caribbean has multiplied by four, but it is necessary to analyse its role in terms of achieving structural change for equality. We believe this income should be part of the production diversification processes that the Region’s countries are carrying out,” said ECLAC’s Executive Secretary, Alicia Bárcena.

According to the organisation’s top representative, “investment in sectors with high technological content has a greater possibility of generating positive impacts in the local economy, but it is equally important for transnational businesses to establish links and productive chains with local companies.”

The average profitability of transnational companies in the Region dropped below 6%, its lowest level in a decade, mainly due to the decline in prices for some commodities exports. Despite that, these companies’ total profits rose to US$111.662 billion dollars in 2013. These earnings, the report warns, represent a negative flow that affects the Region’s current account deficit.

With respect to the sectors that receive flows, ECLAC’s study does not show evidence of significant change. In 2013, the service sector attracted 38% of the total, manufacturing 36% and natural resources 26%.

Europe as a Region led the list of main investors in 2013: both in Brazil and Mexico it accounted for about half of FDI flows. The United States, for its part, continues to be the biggest single investor.