Foreign Direct Investment (FDI) flow into Latin America hit a new record high of US$ 166 billion in 2012, according to a report published by the Economic Commission for Latin America and Caribbean (ECLAC) on 14 May. This is 4.4 % above the level posted in 2011 and confirms a consistent uptrend that began in 2010. The figures for 2012 were particularly significant because the global FDI flows had decreased by 13 percent in 2012 from the previous year. The developed countries had seen a drop of 22% in FDI in 2012.
The region’s share of global FDI flows reached 12.5 % in 2012. Brazil was the largest recepient of FDI with 65 bn $ ( 2% less than in 2011) accounting for 41% of the total FDI flows into the region. Chile was the second highest recipient with 30.3 bn $. Colombia was third with 15.8 billion, followed by Mexico 12.6 billion ( this was 35% less than in 2011), Argentina-12.5 bn and Peru 12.2 bn ( 49% increase over 2011). Central America received 8.8 bn of which Panama was the highest recepient with 3 bn followed by Costa Rica- 2.2 billion.
Much of the FDI in South America went into natural resources sector including oil and gas and minerals. In Brasil and Mexico a significant portion of FDI went into manufacturing and services. Bulk of of FDI in Costa Rica went into forty high-technology greenfield projects in advanced manufacturing and life sciences.
The confidence of the foreign investors in Latin America has gone beyond FDI and they increased their portfolio investment also in 2012.
The general macroeconomic stability of the region and sustained growth (despite the ongoing crisis in Europe) as well as the relatively high prices of commodities have been the main drivers of FDI into Latin America.
US and Europe are the main origin of FDI although a substantial part ( including Chinese investment) has come through tax havens such as Caymen Islands, British Virgin Islands and Luxemburgh.
Outward FDI by Latin American companies ( mostly MultiLatinas) increased by 17% in 2012 to an all-time high of US$ 48.7 billion, following historically high figures for the past three years. The share of MultiLatinas in the total FDI into Latin America is an impressive 14 percent.These investments have come mainly from companies of Brazil, Chile, Colombia and Mexico, but in 2012 came almost exclusively from Mexico and Chile. Mexico was the region’s largest outward investor in 2012, with US$ 25.6 billion, more than double the figure for 2011 and far exceeding the previous high of two years earlier. América Móvil was the prime stakeholder in this process, as it expanded its activities into Europe. Chilean outward investment also reached a fresh record in 2012 at US$ 21 billion, mainly in South America and principally in the retail industry, forestry and transport. The most notable case is the merger of Chilean airline LAN with Brazil’s TAM, which had been announced in 2010 but was not completed until 2012. The US$ 6.5 billion transaction via a stock swap has created LATAM, a binational airline that is now the largest in Latin America. Many Brazilian firms have continued to expand abroad, as well, and account for 7 of the 20 largest acquisitions by MultiLatinas in 2012. For Indians it would be interesting to know that the Mexican company Cinépolis (the fourth largest movie theatre chain in the world) announced early this year the opening of 350 theatres in Brazil, Colombia, India and the US.
There was no big ticket investment by Indian companies in Latin America in 2012. But there were some cases of investment in double digit millions. There is potential for Indian companies to invest in Latin America in sectors such as energy, agribusiness, mining and IT/BPO.