QCOSTARICA – The Economic Commission for Latin America and the Caribbean (ECLAC) estimates that Latin America and the Caribbean is the region forecast to have the steepest decline in Foreign Direct Investment (FDI).
The ECLAC says FDI in the region would fall between 45% and 55% in 2020, as a result of the crisis caused by the covid-19 pandemic; Worldwide, the amount of Foreign Direct Investment (FDI) is seen shrinking by 40% in 2020.
ECLAC presented its report Foreign Direct Investment in Latin America and the Caribbean 2020, on FDI in the region, which recorded that, in 2019, Latin America and the Caribbean received US$160,.7 billion of FDI, which was 7.8 % less than in 2018.
By 2021, world FDI would continue its decrease (between 5% and 10%), obtaining its lowest value since 2005. However, Latin America and the Caribbean is the region that would have the steepest decline next year, according to Alicia Bárcena, executive secretary of Cepal, a regional body of the United Nations.
The agency explained that since 2012, when the historical maximum was reached, the fall in FDI flows has been almost uninterrupted in Latin America and the Caribbean – primarily in South American countries.
The report, presented this December 2, says that during 2019 there were heterogeneous results according to each local economy, in the region: in 17 countries there is a drop in inflows in 2019 compared to 2018, while in nine countries there is an increase.
The five countries that received the most investment were Brazil (43% of the total), Mexico (18%), Colombia (9%), Chile (7%) and Peru (6%).
In Central America, FDI inflows grew only in Panama and Guatemala.
When analyzing the period 2010-2019, Europe consolidated its status as the most important investor in the region, followed by the United States. Intraregional investments, meanwhile, fell from 12% to 6%.
With regard to the performance of Latin American transnational corporations, known as translatinas, ECLAC’s publication records a 75% increase in FDI outflows from the region in 2019. However, upon examining the 2010-2019 decade as a whole, it can be seen that Latin American investment has lost steam.
“The contributions that FDI has made in the region have been relevant, as a complement to national investment and a source of new capital, as well as for expanding export-related activities and developing the automotive industry, telecommunications, some segments of the digital economy and also sectors that have acquired strategic importance today in the context of the COVID-19 pandemic, such as the pharmaceutical industry and that of medical devices,” the study indicates.
“The FDI received by Latin America and the Caribbean has not catalyzed relevant changes in the region’s productive structure, largely because the policies to attract these flows have not been articulated with those focused on productive development. FDI offers major opportunities to move towards a new sustainable economy,” Alicia Bárcena emphasized. “It is urgently necessary to restore the role of industrial policies as an instrument for transforming the region’s productive structure.”
The report also indicates that Latin America and the Caribbean has achieved a good position in terms of exporting medical devices, driven precisely by transnational corporations, with Mexico, Costa Rica and the Dominican Republic particularly standing out.
“In Latin America and the Caribbean, the COVID-19 crisis shows the growing importance of stimulating regional cooperation and the development of a regional health-care and medical devices market and of cross-border industrial centers. The medical devices industry requires manufacturing, scientific and technological capacities that are present in several countries in the region, the potential of which was revealed amid the health emergency. The development of national industrial and technological capacities and improved access to medical devices for the inhabitants of Latin America and the Caribbean is a strategic challenge, and to successfully tackle it, national and regional policy guidelines will be needed,” the document concludes.