Foreign direct investment in Latin America reached its maximum historical value

The foreign direct investment (FDI) increased by 55.2% in 2022 in the countries of Latin America and the Caribbean and thus reached its maximum historical value, according to a report published this Monday by the Economic Commission for Latin America and the Caribbean (Cepal), an organization that also urges , to the states to improve the design of their policies to dedicate part of this contribution to the energy transition and to a sustainable productive development of the entire region.

According to the report, the group of Latin American and Caribbean countries entered US$ 224.579 million of FDI, the highest value since records have been kept due to “to the growth of all investment components, especially the reinvestment of profits and the rise in the service sector”.

Since 2013, FDI inflows into Latin American and Caribbean countries have not exceeded US$200 billion, recalls the study.

“This dynamic is consistent with the post-pandemic recovery and it is not clear if it will remain at similar levels in 2023,” warns, however, this annual report, which also recorded an increase in the weight of these flows in regional GDP, coming to represent 4.0%”, precise.

“The challenge of attracting and retaining direct foreign investment that effectively contributes to the sustainable and inclusive productive development of the region remains more relevant than ever.”, affirmed the Executive Secretary of ECLAC, Jose Manuel Salazar-Xirinachswho presented the main conclusions of the study at a press conference in Santiago de Chile.

“There are new opportunities in an era of reconfiguration of global value chains and geographic relocation of production in the face of changing globalization”, he stressed before emphasizing that the challenge is “maximize the contribution of FDI to development” with “Policies for value addition and promotion in value chains, human resources development, infrastructure and logistics, and local capacity building”, he indicated.

Brazil, leader

According to the report, almost all the countries of Latin America and the Caribbean received more foreign direct investment in 2022, with Brazil, which received 41% of the regional total and ranks as the fifth destination for global FDI, in the lead followed by from Mexico (17%), Chile (9%), Colombia (8%), Argentina (7%) and Peru (5%).

Costa Rica, for its part, was the main recipient of foreign direct investment in Central America, while in Guatemala these flows registered a significant drop due to an extraordinary value in 2021, but returned to their historical average.

“The variation in FDI inflows was also positive in the Caribbean, driven mainly by higher investment in the Dominican Republic, which was the second largest recipient country after Guyana.“, he pointed.

USA and the EU, main investors

At the regional level, 54% of foreign direct investment entered the services sector, although both the manufacturing and natural resources sectors rebounded.

As for investors, the United States (38% of the total) and the European Union (17%, excluding the Netherlands and Luxembourg) led the investment. Along the same lines, FDI from countries in the same region of Latin America and the Caribbean had a significant jump from 9% to 14% of the total.

In 2022, the amount invested abroad by Latin American transnational companies, known as trans-Latinas, reached historic levels: US$74.677 million, the highest figure recorded since this series began to be compiled in the 1990s.

On the other hand, the amount of FDI project announcements in Latin America and the Caribbean grew by 93% in 2022, totaling close to US$100 billion.

For the first time since 2010, the hydrocarbons sector (coal, oil and gas) led the ads, with 24% of the total, followed by the automotive sector (13%) and renewable energy (11%).

energy transition

The study of the ECLAC It also identifies the energy transition as one of the sectors that can boost economic growth and therefore recommends that States prioritize it in their economic agendas and make it a great engine of productive transformation in the region.

“FDI can play a key role in accelerating the energy transition, facilitating technology transfer and enabling emerging technologies. Governments must lead the coordination of strategies for the success of the energy transition in the region”, emphasizes the Commission.

“One of its central functions is to develop long-term policies that promote investment in renewable energy sources so that the transition is fast and safe, and does not leave the region behind, in a context in which energy from clean sources is a competitive factor”, says the study.

“However, ECLAC also warns that in this process the importance that the non-renewable energy sector still has for some countries in the region must be considered, especially in terms of income generation to meet social demands, productive development and security. energetic”, he concludes.

Source: EFE