By Mike Godfrey, Tax-News.com – In 2012, Latin America and the Caribbean received a record USD173.4bn of foreign direct investment (FDI) (6.7 percent more than in 2011), despite an external context characterized by shrinking FDI flows worldwide, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
The figures are attributable to the region’s steady economic growth, high prices for raw materials and the impressive returns on investments related to natural resource exploitation, according to the report Foreign Direct Investment in Latin America and the Caribbean 2012, which was launched at the Commission’s headquarters in Santiago, Chile.
ECLAC predicts that this year’s FDI inflows to the region will range between a fall of 3 percent and a rise of 7 percent.
Brazil remains the main recipient of FDI, despite the slight 2 percent decrease recorded in 2012, when it received USD65.3bn – or 41 percent of regional inflows. In 2012, the largest increases were represented by Peru (which received USD12.2bn) and Chile (USD30.3bn), making the latter the second largest recipient of FDI.
Other countries that posted higher figures than in 2011 were Argentina (27 percent), Paraguay (27 percent), Bolivia (23 percent), Colombia (18 percent) and Uruguay (8 percent). In Central America, the most striking results were El Salvador (34 percent), Guatemala (18 percent), Costa Rica (5 percent), Honduras (4 percent) and Panama (10 percent) (which remains the subregion’s main recipient).
Mexico’s figures were much lower than in 2011, and this is largely attributable to the USD4.1bn flotation of 25 percent of the subsidiary of Spain’s Santander bank. Other countries that experienced falls in 2012 were Ecuador, Venezuela and Nicaragua.
FDI inflows to the Caribbean rose for the third year in a row, but failed to reach the record levels of 2008. The main recipient is the Dominican Republic, with inflows swelling by 59 percent in 2012.
United States and European Union countries remain the main investors in Latin America and the Caribbean, with Canada and Japan also making significant contributions. Having said that, 2012 saw a dramatic rise in the proportion of FDI from the region’s own countries (14 percent of the total). A high percentage of the investment received cannot be attributed to any particular economy because of the increasingly common practice of transnationals channelling their investment abroad through subsidiaries in third countries.
Outward direct investment by Latin American and Caribbean countries abroad grew by 17 percent between 2011 and 2012, to reach USD48.7bn. This is 2 percent higher than the record reached in 2010. In the past decade, most investments came from Brazil, Chile, Colombia and Mexico, while in 2012 they came almost exclusively from Mexico and Chile.
