Monday, June 20, 2016

Latin America had attracted 172 billion dollars of FDI in 2015

Foreign Direct Investment (FDI) in Latin America in 2015 was 172 billion dollars, according to the June 2016 report of ECLAC. This is not bad considering the the poor economic performance of the region which suffered a GDP contraction of 0.4% last year. While the 2015 FDI was 9.5% less than that received in 2014, it was more than the FDI received in 2010 (168 billion dollars) during the peak of the economic boom of the region. What is even more interesting is that the outward investment by Latin American firms was 47.3 billion dollars in 2015. Chilean firms were the top investors with 15.8 bn.
Brazil continued to be the top recipient of FDI with 75 billion dollars (down from 96.8 bn in 2014) with a share of 42% of the total FDI in Latin America, in spite of the GDP contraction of 3.5% in 2015. 
Mexico had received 30 bn, increasing from 25.6 bn in 2014. Of this, fifty percent went into the manufacturing sector  and mostly into the automotive sector which is flourishing.
Chile received 20.5 bn ( down from 22.6 bn), Colombia –12 bn ( from 16.3 bn last year), Argentina-11.6 bn ( increase from 5 bn) and Peru –6.8 bn ( down from 7.8 bn ). 
The six countries of Central America had attracted an impressive 11.8 billion, the highest in the last ten years. Of this, Panama had received 5 bn and Costa Rica 3 bn.
USA was the major source of FDI with a share of 25.9%, followed by Netherlands (15.9%) and Spain ( 11.8%).
The fall in FDI in 2015 was due to the continuing low international prices of oil, minerals and metals, the decline in Chinese demand and the weaker domestic consumer demand. Mining sector has suffered  drop in FDI while manufacturing, renewable energy and telecom and other services have increased their share. 

ECLAC has predicted FDI decline of 8% in 2016, in view of the GDP contraction of 0.6% projected for the region in 2016.
Outward FDI by Latin American firms declined by 15% from 2014 to 47.3 billion dollars in 2015. Chile was the major foreign investor with 15.8 bn ( up from 9.8 bn in 2014) followed by Brazil-13.5 bn (down from 26 billion in 2014) and Mexico –12 bn (up from 7.4 bn in 2014) and Colombia-4.2 bn (up from 3.8 bn). 
There were two major Indian investments in Latin America in 2015. The biggest was the 342 million dollar plant established by the Jaguar Land Rover of Tata Motors in Brazil. The plant was inaugurated in June 2016. The second one was the 70 million dollar investment of Hero Motors in a motorcycle plant in Colombia. Some small acquisitions took place in IT and other sectors. 
Renuka, which had invested half a billion dollars in the Brazilian sugar sector in 2010 had declared bankruptcy in September 2015, due to operational losses and difficulty in servicing the debts.  Pidilite and Gravitas have been looking at divestment since their operations in Brazil and Honduras have been running in losses.
If any Indian company is interested in acquisitions in the region, this is a good time especially in Brazil and Argentina where the asset prices are low and exchange rates are favorable. 
The only notable Latin American investment in India in 2015 was from Mexico.  In January 2015, Cinepolis of Mexico acquired Fun Cinemas from Essel Group of India. With this acquisition, Cinepolis has added 83 more screens, making its total 193. Its target is 400 screens by 2017. Kidzania from Mexico has opened a second children's edutainment park in Noida, outside Delhi, after its successful first investment in Mumbai. 

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