Foreign direct investment from Latin America and the Caribbean fell by 34.7%, representing a loss of 56,000 million dollars and the lowest level in a decade, according to a new report of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) presented this Thursday.
Specific, Foreign investment in the Latin American region was 105,480 million dollars during 2020, which is equivalent to 2.5% of the Gross Domestic Product (GDP). By 2021, ECLAC estimates that direct foreign investment will grow between 10% and 15% globally. In Latin America, the projection ranges from a 5% decline to a 5% advance.
By region, the annual study Foreign Direct Investment in Latin America and the Caribbean 2021 point out that Central America assumed the bulk of investment losses, with a drop of 89.4%, while in the Caribbean the contraction was 25.5%.
For the executive secretary of ECLAC, Alicia Bárcena, the data represent a “big drop”, a trend that had already been decreasing since 2013.
“Foreign direct investment has made relevant contributions in Latin America and the Caribbean, but there are no elements that allow us to affirm that in the last decade it has contributed to significant changes in the productive structure of the region or that has served as a catalyst for the transformation of the productive development model ”, highlighted Bárcena.
In this context, the executive secretary It is committed to a multilateral strategic approach to position the interests of the region and that investment flows contribute to sustainable development.
“Today the challenge is greater due to the characteristics and magnitude of the crisis. We need to channel foreign direct investment towards activities that generate greater productivity, innovation and technology”, Bárcena added.
Investment only grew in five countries
Only in five countries did foreign direct investment increase compared to 2019, which were Bahamas, Ecuador, Barbados, Paraguay and Mexico. With this data, The Aztec country consolidated itself as the second recipient of foreign direct investment in the region behind Brazil, which suffered a 34% contraction in terms of foreign investment.
For its part, the natural resources and manufacturing sectors, with reductions of 47% and 38%, respectively, were the hardest hit during 2020. Renewable energies remained the sector in the region that arouses the greatest interest from foreign investors.
The United States increased its share of foreign investment in the region from 27% to 37% in 2020 due to the sharp decline in Europe (which fell from 51% to 38%) and Latin America (which went from 10% to 6%).
The lower drop in the United States as the source of investment flows is mainly explained by the increase in investments from this country in Brazil in 2020. In contrast, inflows from the two European countries that had the most investments in Brazil – the Netherlands and Luxembourg – fell between 2020 and 2019, which led to a drop in the weight of Europe as an investor in the region.
In 2020, the flows of Latin American transnational companies (trans-Latins) also fell (-73%), although with high heterogeneity. Thus, while Chile and Mexico showed an increase in direct investment flows abroad, Argentina, Brazil, Colombia and Panama registered setbacks.
FDI falls by 35% globally
Globally, foreign direct investment fell by 35% in 2020, reaching approximately one trillion dollars (844,493 million euros), which represents the lowest value since 2005.
However, the contraction of investment flows during 2020 was heterogeneous, since While the Latin American region suffered a drop of 34.7%, China gained 6%, consolidating itself as the largest investor in the world and the second largest recipient. Likewise, 66% of investments worldwide were destined for developing economies.
With regard to investment projects, their value was reduced by 35%. By sectors, mining, oil and automotive were the most affected, as well as services, which also registered reductions (-25%) with sectoral differences.
According to the United Nations body, the international context suggests that global investment flows will have a slow recovery.
On the other hand, the search for assets in strategic sectors for international reactivation and for public plans to transform the productive structure (infrastructure, health industry, digital economy) indicates that A large part of these operations would be destined for Europe, North America and some Asian countries, increasing global asymmetries, warns the study.
With information from Europa Press
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