The Economic Commission for Latin America and the Caribbean (ECLAC) has revealed that in 2022, Latin America and the Caribbean received US$224.579 billion in Foreign Direct Investment (FDI), a figure that is 55.2 per cent above 2021 levels which marks the highest value on record. According to the ECLAC report entitled ‘Foreign Direct Investment in Latin America and the Caribbean 2023,’ which was released yesterday in Chile, it said this result is mainly attributable to the increase in FDI in some countries, particularly in Brazil; to growth in all the components of FDI, especially earnings reinvestment; and to the increase in FDI in the services sector.
“This dynamic is consistent with the post-pandemic recovery and it is unclear whether it will stay at similar levels in 2023. FDI inflows to Latin American and Caribbean countries had not topped $200 billion since 2013. These flows also increased as a share of regional GDP in 2022, accounting for 4.0 per cent, the document states,” the report disclosed.
ECLAC’s Executive Secretary, José Manuel Salazar-Xirinachs said the challenge of attracting and retaining Foreign Direct Investment that contributes effectively to the region’s sustainable and inclusive productive development is more relevant than ever.
He noted there are new opportunities in an era of reconfiguration of global value chains and geographic relocation of production in the face of changing globalisation.
The senior United Nations official emphasised that “the challenge is not only to attract and retain, but also to maximise FDI’s contribution to development, and to this end countries must focus on post-establishment productive development policies, which include the promotion of productive linkages, policies for adding value and moving up value chains, for human resources development, infrastructure and logistics, and building local capacities.”
According to the report, nearly all the countries of Latin America and the Caribbean received more Foreign Direct Investment in 2022. Leading the list were Brazil (which received 41 per cent of the regional total and ranks as the No. 5 destination for global FDI), followed by Mexico (17 per cent), Chile (9 per cent), Colombia (8 per cent), Argentina (7 per cent) and Peru (5 per cent).
It stated that Costa Rica was the main Foreign Direct Investment recipient in Central America and in Guatemala, these flows showed a significant decline due to an extraordinary value recorded in 2021, but they returned to their historical average.
There was also a positive change in FDI inflows to the Caribbean, fueled mainly by greater investment in the Dominican Republic, which was the second-largest recipient country after Guyana.
“At a regional level, 54 per cent of Foreign Direct Investment went into the services sector, although both the manufacturing and natural resources sectors also rebounded.
Financial services; electricity, natural gas, and water; information and communications; and transportation-related services had the largest share of investments in the services sector as a whole.
The document points to a more than 80 per cent increase in FDI from Latin America and the Caribbean to destinations both inside and outside the region. In 2022, the amount invested abroad by transnational Latin American companies, known as translatinas, reached a historic high: US$74.677 billion, which is the highest figure recorded since this series began to be compiled in the 1990s,” ECLAC mentioned.
Furthermore, the report said the amount of FDI project announcements in Latin America and the Caribbean grew by 93 per cent in 2022, totaling nearly US$100 billion. For the first time since 2010, the hydrocarbons sector (coal, oil and gas) led the announcements, with 24 per cent of the total, followed by the automotive sector (13 per cent) and renewable energies (11 per cent).
Nonetheless, ECLAC also warns that in this process, consideration must be given to the importance that the non-renewable energy sector still has for some countries in the region, especially in terms of generating revenue to address social demands, those related to productive development and energy security.