Inflows of foreign direct investment (FDI) into Latin America rose by 8% in the first six months of 2012 reaching 94 billion dollars from 87 billion in the first half of 2011, according to figures released by the Economic Commission for Latin America and the Caribbean (ECLAC) on 23 October.
In the first six months of 2012, Brazil received 43 billion $, followed by Chile 12 bn, Mexico 9.6 bn, Colombia 7.8 bn, Peru 5.4 bn and Argentina 5.3 bn. Among the smaller countries Uruguay got 1.4 bn and Costa Rica 1 bn.
At the same time, investment by Latin American enterprises abroad surged by 129% in the first half of the year reaching 21 bn $ as against 9.3 bn in the same period in 2011. Mexican companies lead with 11.5 billion followed by Chile with 10 bn.
The rise in FDI income is attributed by ECLAC to economic buoyancy and stability in most countries and high commodity prices, which continue to encourage investment in mining and hydrocarbons, particularly in South America. Peru is the hottest destination for investment in mining while Colombia has also become attractive for energy and mining investment.
The manufacturing sector in Mexico and Brazil have been steadily attracting FDI. With the closing of the gap (at one time it was four to one) between Mexican and Chinese wage levels, Mexico has regained its privileged position as the factory for US. Mexico has become is the world’s second-largest exporter of fridges, and the second-largest supplier of electronic goods to the United States and a competitive automobile exporter.
It should be noted that FDI had increased in Latin America by 31% in 2011 from 2010, reaching a record 153 billion dollars. Latin America was the region that recorded the highest percentage increase in 2011 taking its global share to 10%.
The increase in FDI in Latin America and even more impressively the jump in the increase of Latin American investment abroad at this time of European crisis, American sluggish recovery and the Asian slowdown are indeed remarkable. They reconfirm the general trend of the new paradigm of economic stability, growth and promise of the New Latin America.
There was no new significant Indian investment in Latin America in 2012 except for the Godrej acquisition of a Chilean cosmetic firm. Many Indian companies have plans to increase their existing investment in IT/BPO, agrochemicals and energy. Some new players are exploring opportunities in mining. The cumulative Indian investment in the region is around 10 billion dollars.