Foreign Direct Investment in Latin America Grew 13.2 Percent in 2018 over 2017

RIO DE JANEIRO, BRAZIL – In contrast to the global trend, the flows of direct foreign investment (FDI) to Latin America and the Caribbean have increased by 13.2 percent in 2018 compared to 2017, totaling US$184.3 billion, reported yesterday, August 14th, the Economic Commission for Latin America and the Caribbean (CEPAL) in Santiago, Chile.

The 2018 regional boom reversed five years of decline.

Global FDI fell 13 percent globally between 2018 and 2017, reaching US$1.3 trillion, in line with what happened in 2010, the first year of recovery after the 2008 world financial crisis.

The outlook for Latin America and the Caribbean for 2019, however, “is not encouraging due to the international context.”

CEPAL expects FDI inflows in Latin America and the Caribbean to drop by up to five percent this year. FDI is regarded as the best investment option because it is used in the economy’s productive sector and is long-term.

An FDI can be realized through capital contributions, loans between group companies or
reinvestment of earnings.

The study shows a significant disparity in national results: in 16 countries, there is a rise in inflows compared to 2017 while in 15 countries, there is a decrease.

Most of the FDI increase in 2018 is due to higher investments in Brazil (US$88.3 billion, 48 percent of the regional total) and Mexico (US$36.9 billion, 20 percent of the total).

Growth

The report states that despite Brazil’s low economic growth in recent years, FDI inflows increased by 25.7 percent in 2018, compared to 2017.

According to CEPAL, 47 percent of FDI inflows in 2018 in Latin America and the Caribbean were directed to manufacturing, 35 percent to services and 17 percent to natural resources.

On the other hand, cross-border mergers and acquisitions were concentrated in Chile and Brazil, in the mining, oil, and basic services (electricity and water) sectors.

In addition, the majority of capital entering the region came from Europe (which has a greater presence in the Southern Cone) and the United States (the main investor in Mexico and Central America), reported ECLAC.

China, on the other hand, has lost its stake in mergers and acquisitions in Latin America and the Caribbean.

With respect to the behavior of Latin American transnational companies, known as translatinas, the CEPAL document reported that FDI outflows from Latin American countries decreased in 2018 for the fourth consecutive year and reached US$37.9 billion.

Furthermore, 83 percent of foreign direct investment from Latin America comes from Brazil, Chile, Colombia, and Mexico.

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