MercoPress. South Atlantic News Agency

Foreign investment in Latin America still below pre-pandemic levels

“It is necessary to articulate productive development policies with the attraction of high productivity investments,” Salazar-Xirinachs said

Despite a 40.7% growth from 2021, Foreign Direct Investments (FDI) in Latin America continue to be below the levels recorded before the COVID-19 pandemic, according to a report released Tuesday in Santiago by the Economic Commission for Latin America and the Caribbean (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,“ ECLAC's report stated.

The region also lost its share as a destination for global investments, representing 9% of the total, ”one of the lowest percentages in the last ten years and far from the 14% recorded in 2013 and 2014.“

Projections are far from encouraging. The region received US$ 142.794 billion in FDI in 2021, 40.7% more than in 2020. However, these levels are still 9.55% below 2019's US$ 157.689 billion.

As a whole, Latin America and the Caribbean accounted for only 9% of total global FDI, one of the lowest percentages in the last ten years and far from the 14% recorded in 2013 and 2014. ”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,“ the ECLAC document cited in its conclusions.

”In a region with low overall levels of investment, foreign direct investment is fundamental for the design of a productive policy,” ECLAC Executive Secretary José Manuel Salazar-Xirinachs said in the report.

Brazil (33%), Mexico (23%), Chile (11%), Colombia (7%), Peru (5%), and Argentina (5%) were the countries to receive the most FDI in 2021.

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.

The main investors came from the European Union and the United States, representing 36% and 34% of the total, respectively. Meanwhile, the number of mergers and acquisitions increased by 33%, which remains “one of the lowest levels of the decade.”

“In a global context in which mergers and acquisitions grew very significantly, in the region they only recovered from the fall that occurred in 2020,” ECLAC noted.

Foreign investors are particularly interested in electricity, gas, water, telecommunications, and oil refining.

In Central America, Costa Rica was the main recipient of foreign funding for the second consecutive year, while Guyana did the same in the Caribbean, with the arrival of the oil capital, surpassing the Dominican Republic, the leader in previous years. Guatemala's “large-scale acquisition” in the telecommunications sector was also highlighted.

“To achieve a positive impact of Foreign Direct Investment, 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.