MercoPress. South Atlantic News Agency

Foreign direct investment inflow to Latam rises 8% in six months to 94.3bn dollars

Chile and its mineral resources are consolidating as a major magnet for FDI

Inflows of foreign direct investment (FDI) to 17 of Latinamerica’s countries rose 8% in the first six months of 2012, compared to the same period a year ago, reaching 94.331 billion dollars, according to figures released on Tuesday by the Economic Commission for Latin America and the Caribbean, ECLAC.

At the same time, investment by Latin American enterprises abroad (or trans-Latins) surged by 129% in the first half of the year.

The rise in FDI can be tracked to economic buoyancy and stability in most countries and high commodity prices, which continue to encourage investments in mining and hydrocarbons, particularly in South America.

However the overview of FDI inflows to the region is uneven with falls registered in several countries, but the strong climb in Chile, Argentina, Dominican Republic, Peru and Colombia give an overall positive result. This combines with the relatively stable flows to Brazil (which dipped slightly by 2%). Latinamerica’s largest economy accounts for 46% of FDI received by the region in 2012 and make it the main recipient in Latin America and the Caribbean.

Chile is also consolidating its position as a major magnet for FDI: in the first half of the year it was the second largest recipient in the region.

In the first six months of the year, Mexico received 19% less FDI than in the previous year. The trend is expected to reverse in the second half of the year, with the inclusion of the 20.1 billion dollars that the Belgian brewery AmBev paid for the Grupo Modelo. In the first half of the year, the same company bought the Dominican Republic's main brewery, Cervecería Nacional Dominicana (CDN), for 1.0 billion dollars. This transaction explains the surge in investment inflows into the Dominican Republic (the Caribbean's main recipient).

In Central America, Panama and Costa Rica received similar flows to last year. Guatemala posted an increase of 47%, while El Salvador and Nicaragua saw inflows fall by 60% and 20%, respectively (in relation to the first half of 2011, when both countries' inflows were exceptionally high).

According to ECLAC by the end of 2012 the region's FDI inflows as a whole will continue to follow these trends which confirm May's estimates of a moderate increase.

The significant rise in trans-Latin investments, which actually dropped in 2011, was mainly due to Mexican and Chilean enterprises, which in the first six months invested 11.5bn and 10.3bn dollars abroad, respectively (similar to the amounts invested during -the whole of 2011).

Brazilian trans-Latins continue the trend seen in 2011, with significant transfers from subsidiaries abroad to parent companies, which results in a negative balance for FDI abroad.

The information for 2012 confirms that the process of business internationalization remains concentrated in a small number of countries and sectors, which results in highly volatile aggregate flows over time. Despite this, since the middle of the previous decade there has been a process of increased activities abroad from trans-Latin corporations.