Monday, May 07, 2012

FDI in Latin America increased in 2011 to a record 153 billion dollars

Despite the global uncertainties and the deepening crisis in Europe, Foreign Direct Investment ( FDI) increased in Latin America and Caribbean by 31% in 2011 from 2010,  reaching a record 153 billion dollars, according to the study released by ECLAC, the UN organization last week.

Latin America was the region that recorded the highest percentage increase in FDI inflows in 2011, increasing its global share to 10%.

This is yet another evidence of the macroeconomic stability, resistance to external turbulence and the continuing and growing investor confidence in the region.

The YPF takeover by Argentina and the Bolivian nationalization of the Spanish power distribution company are isolated episodes and are not indicative of any trend. ECLAC predicts high FDI in 2012 too.

Highlights of the ECLAC report:

Brazil received the highest FDI with 66.6 billion dollars followed by Mexico ( 19 bn ), Chile ( 17 bn), Colombia ( 13 bn), Peru ( 8 bn), Argentina ( 7 bn ) and Central America- 8 bn

Services sector received 45% of inflows followed by manufactures-38% and natural resources-18%

Europe was the largest source of FDI in 2011.

It is interesting to note that the share of foreign banks in Latin American banking has increased from 11% in 1995 to 35% in 2010. Foreign share in the banking of Mexico is the highest with 70%, followed by  Uruguay-54%, Peru-42% and Chile-40%.

Outward investment by Latin America fell to 22 bn $ in 2011 from 45 bn in 2010. This is due to the fact that the Brazilian companies focussed more on the domestic market last year. Chile had the most outward FDI with 12 bn $. Mexico invested outside 10 bn, Colombia  8 bn and Argentina - 1.5 bn.

The Brazilian industrial development bank BNDES is in the forefront supporting the global expansion of Brazilian multinationals. It had provided 22 billion dollars to six Brazilian companies JBS, Marfrig, Oi, BRF, Fibria and Ambev in addition to continuing support to other companies.

The profit repatriation of foreign companies from Latin America has increased from an average of 20 bn $ in the period 1998-2003 to a high of 93 bn in 2008.

There was no significant big ticket Indian investment in Latin America in 2011 although there has been modest investment by some companies. Some Indian firms have shown interest and the existing companies are keen to expand their operations.

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