September 19, 2021

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Foreign investment in Latin America fell in 2020

Foreign investment in Latin America fell in 2020Santiago de Chile, August 5 (Prinza Latina) Foreign direct investment (FDI) in Latin America and the Caribbean reached $ 105,480 million by 2020, the lowest level of the last decade, ECLAC announced today.
The Economic Commission for Latin America and the Caribbean (ECLAC) presented its annual report on foreign direct investment in this capital in 2021, indicating that this amount is 34.7 percent lower than in 2019, and only half of the historical records obtained in 2012.

This is a result of the economic contraction caused by the Govt-19 epidemic, which has been the main source of FDI in countries in the region since 2013.

The study points out that there was some recovery between September 2020 and last February, but a new fall has been reported since that date, so it is unlikely that foreign direct investment will increase by more than five per cent this year.

Considering the severity of the current crisis, Barsena pointed out that countries should “send FDI to activities that create greater productivity, innovation and technology”.

In particular, he added, towards strategic sectors such as renewable energy, the inclusive digital revolution, sustainable electromobility, the healthcare manufacturing industry, the circular economy and sustainable tourism.

In addition, the inflow of foreign investment was inconsistent as it was the second largest recipient after Brazil in the Bahamas, Barbados, Ecuador, Paraguay and Mexico.

Meanwhile, the natural resources and manufacturing sectors were hit hard by 2020, down 47 and 38 percent, respectively, while renewable energy continued to be the most interesting part for foreign investors.

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Regarding the origin of these capitals, the United States increased its participation in foreign direct investment from 27 to 37 percent due to its strong investments in Brazil; Europe fell from 51 to 38 percent and the region’s from 10 to six percent.

Alicia Parsena also felt that the governments of the region should move forward with strategic plans to reactivate and transform production.

In this sense, they must use their public and private capabilities so that the attraction of foreign capital is “part of industrial policy as a tool to transform the production structure,” said a senior ECLAC official.

The report dedicates a special chapter to relations with China in which recovery after the epidemic is said to be “an opportunity to start a new phase in economic relations with the Asian country”.

In this regard, he believes that it is necessary to develop policies so that Chinese investments “contribute to building productivity in the recipient countries, establishing contacts with local suppliers, creating employment and promoting sustainable growth.”

Mem / RC