Chile is the third most dynamic market for foreign investment in Latin America
Published: January 18, 2011
Mexico, Peru and Chile have attracted the highest growth in foreign investment in Latin America.. While Brazil has experienced a lower growth rate, it is still the preferred destination for foreign investment.
Latin America and the Caribbean experienced the largest growth in Direct Foreign Investment (DFI) in 2010, with an increase of 21.1% compared to the previous year, according to a report issued by the United Nations Conference on Trade and Development (UNCTAD).
Countries such as Mexico, Peru and Chile lead -according to the entity- the growth levels of direct foreign investment in the region, showing a special dynamism in comparison to the contraction of markets such as Europe.
The study regarding the "Global and Regional Trends of DFI in 2010" shows that global direct foreign investment last year " remained at very low levels, despite signs that the global economy had started to recover ", stated the Director of the Investment and Business division of the organization, James Zhan.
The expert pointed out that "this is the bad news regarding DFI, but the good news is that for the first time developing countries and the transition economies have absorbed more than half of these global investment flows.
DFI flows in Latin America and the Caribbean increased from USD116,000 million in 2009 to USD141,000 million in 2010, resulting in growth of 21.1 per cent. Within the region, the most significant increases were in Mexico, with 53 percent growth, Peru, with 44.7 percent, and Chile with 43.4 percent.
Although Brazil had a lower DFI growth of 16.3 percent, this country still continues to be the main destination for foreign investment for the last four years in a row, reaching USD 30,200 million in 2010.
The main factor that explains the significant growth in DFI in Latin America is the strong increase in cross-border mergers and acquisitions, which reached USD32,000 million in 2010, compared to negative figures in 2009.
The majority of this M&A activity was concentrated in the petroleum and gas, mining, and food and beverage industries.
The UNCTAD shows "cautious optimism" in its outlook for 2011, states Zhan, who said not to wait for DFI to return to pre-crisis levels.
Global DFI is expected to reach USD1.3 to 1.5 billion this year, but there are still some "risk factors" for this positive scenario, such as currency volatility, high sovereign debt levels, and protectionism.