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Latin America Investment News on Viva Tropical

Latin America Receives Largest Foreign Direct Investment in Recent History

Article Summary:

Latin America and the Caribbean received 153.448 million dollars in foreign direct investment (FDI) in 2011, representing 10% of these global flows. This is the largest amount of FDI so far absorbed by the region, indicated the study “FDI in Latin America and the Caribbean 2011.”
Foreign Direct Investment in 2011, in millions: Panama – $2,790, Costa Rica – $2,104, Honduras – $1,014, Guatemala – $985, Nicaragua – $460, El Salvador – $386.

Photo Credit: ECLAC

Original Article Text From ECLAC via Google Translate:

Latin America and the Caribbean received 153,000 million U.S. dollars of foreign direct investment in 2011
It is a historical amount that could overcome this year. However, the agency warns of the increasing repatriation of profits of transnational corporations to their countries of origin.

Latin America and the Caribbean received 153,448,000 dollars of foreign direct investment (FDI) in 2011, representing 10% of these global flows, according to a report released today by the Economic Commission for Latin America and the Caribbean ( ECLAC ) in Santiago, Chile.

This is the largest amount of FDI so far absorbed by the region, the study FDI in Latin America and the Caribbean 2011 . In 2010 the region received 120,880 million, while in 2009 the international economic crisis brought down the entries to 81.589 million dollars. The record high was recorded in 2008, when revenue totaled 137.001 million dollars.

The main recipients of FDI in the region in 2011 were Brazil (66 660 million, representing 43.8% of total flows to the region), Mexico (19,440 million), Chile (17,299,000 dollars) , Colombia (13,234,000 dollars), Peru (7,659,000 dollars), Argentina (7,243,000 dollars), Venezuela (5.302 million dollars) and Uruguay (2,528,000 dollars). Of these countries, Brazil, Chile, Colombia, Peru and Uruguay reached record highs.

In Central America, FDI inflows increased by 36% compared to 2010 and highlights the amounts received by Panama (2790 million), Costa Rica (2,104 million) and Honduras (1,014 million). Entries in the Caribbean rose 20% compared to last year, leading the Dominican Republic with 2,371 million dollars.

“Despite the uncertainty that still reigns in global financial markets, the economies of Latin America and the Caribbean attracted significant amounts of FDI in 2011, amounts will remain high in 2012,” said the Executive Secretary of ECLAC , Alicia Barcena .

In 2011, 46% percent of net FDI inflows accounted for reinvestment of profits (the remainder is divided between capital contributions and loans between companies), which according to the agency reflects the confidence of transnational corporations and opportunities business in the region.

According to the report, this trend began in 2002, is explained by the magnitude of accumulated assets by transnational corporations in the region, as well as increasing the profitability of these assets due to good economic performance of countries and high international prices of commodities exported.

However, the ECLAC highlights while another phenomenon that has become important since 2004: the increasing repatriation of profits by transnational corporations investing in the region, and recalling that FDI is not a unidirectional flow. “The revenues transferred to FDI source countries have increased from 20,000 million dollars a year between 1998 and 2003 to 84,000 million dollars a year between 2008 and 2010,” said Barcena .

The document also notes that FDI enhances specialization in Latin America and the Caribbean. In 2011, 57% of the FDI received by South America (excluding Brazil) addressed the natural resource sector, 36% to 7% in services and manufacturing. In contrast, 7.8% of FDI received by Mexico, Central America and the Caribbean was oriented to natural resources, 39.7% and 52.5% in manufacturing to services. In Brazil, manufacturing and services sectors were 46.4% and 44.3% respectively, while natural resources 9.2%.

“In this context, it is urgent to promote policies to guide and benefit from FDI potential, including the transfer of knowledge and technology, and increasing local capacity by strengthening national systems of innovation, creation of production chains, human resource training and development of local entrepreneurship, “a senior official stressed the United Nations.

The overseas investments of transnational corporations in Latin America and Caribbean, known as Latins, fell to 22.605 million dollars in 2011 (in 2010 totaled 44.924 million dollars). Despite this decline, the ECLAC noted that these firms are still in expansion stage.

The decline, according to the agency, is explained by the performance of Brazil, where net lending from foreign subsidiaries to parent companies increased, while decreased capital contributions, suggesting that firms Brazilians are investing more in their own country.

Chile was the country that invested abroad in 2011 (11.822 million), followed by Mexico (9,640 million) and Colombia (8.289 million dollars).

According to the report of the ECLAC , the European Union (EU) as a block, is the largest investor in Latin America and the Caribbean. In the last decade, the EU invested an average of 30,000 million dollars per year in the region, 40% of the total received. European investments, which have been directed mainly towards South America, are widely diversified and are very important in several strategic sectors such as electricity and banking.

Among the major investors in 2011 will include the U.S. (18%), Spain (14%), the Latin American and Caribbean region itself (9%) and Japan (8%), among others.

The ECLA foresees that in 2012 FDI flows to Latin America and the Caribbean will remain at high levels. However, the agency warns that if the crisis in the eurozone larger gains could reverse the flow of investments, especially in Europe.

Because of this uncertainty, the attractive position of Latin America and the Caribbean for transnational corporations, the agency projected that in 2012 FDI inflows to the region vary in a range of between -2% and 8% on revenues 2011.

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