Foreign direct investment increases more than 50% in Latin America

Garment industry worker in a factory in Nicaragua

The growth of the Demand for essential commodities and minerals in 2022 fueled an increase in foreign direct investment in Latin America and the Caribbeanwhich reached a record of 208,000 million dollars, 51% more than the previous year, revealed this Wednesday the United Nations Conference on Trade and Development (UNCTAD).

According to him World Investment Report 2023 of UNCTAD, the increase Contrasted with the global trendwhich marked a decrease of 12%, or $1.3 trillion.

Brazil was the country that captured the most flows investment, with 8… million dollars, an increase of 70% compared to the previous year. The second largest recipient was Mexico, which with 35,000 million dollars registered a rise of 12%.

In it Caribbeanthe Dominican Republic led the entry of flows with 4,000 million dollars.

South America It was the subregion that led the increase in foreign direct investment with 73% more than in 2021.

Garment industry worker in a factory in Nicaragua

The last five years in the region

UNCTAD explained that in the last five years regional economic groupings have attracted flows in line with the general trend in Latin America and the Caribbean.

Flows increased to the member States of the Latin American Integration Association (34%, up to 195,000 million dollars), the Common Market of the South (35%, up to 105,000 million dollars) and the member States of the Caribbean Community (the double, up to 6.5 billion dollars).

Meanwhile, these entries fell by 11% to the Member States of the Central American Integration System, up to 13,000 million dollars.

In 2022, the share of advertisements for projects in new intraregional facilities remained relatively small, 11% of all projects in the region, but still higher than in 2017, when it was 8% of the total.

The report indicates that multinational companies from Latin America and the Caribbean had 62% of the value of their investment projects in new plants in the region.

The cross-border mergers and acquisitions increased by 80%, until reaching 15,000 million dollars. The manufacturing sector registered the largest increase in net sales, especially in food, beverages and tobacco, chemical products, paper and paper products.

However, the services sector continued to be the most important, with net sales worth 9.6 billion dollars, mainly in information and communication.

The value of the Announced investments in new facilities increased by 57%, most of the commitments being allocated to the extractive and automobile industries.

The number of operations announced for financing of international projects decreased by 18%, mainly in the mining, transport infrastructure, oil and gas sectors.

overall drop

Although Latin America benefited from inflows, the Global foreign direct investment decreased by 12% in 2022, to 1.3 trillion dollarsafter a strong rebound in 2021 after the sharp fall in 2020 induced by the crisis due to the COVID-19 pandemic.

UNCTAD attributed last year’s decline to lower volume of financial flows and transactions in developed countries.

He explained that this slowdown was due to the war in Ukraine, high food and energy prices, and debt pressures.

The report adds that the global drop in flows was mainly due to financial transactions by multinational companies in developed economies, where foreign direct investment fell by 37% to $378 billion.

Solar power farm in Thailand

The outlook is no better in 2023

UNCTAD warned that the global environment for international business and cross-border investment remains difficult in 2023.

The Conference estimated that the downward pressure on foreign direct investment will continue this year.

The heightened geopolitical tensions are one of the pressure factors identified by UNCTAD.

In addition, the report highlighted increased investor uncertainty due to the turmoil in the financial sector.

Massive investment in clean energy is urgently needed

UNCTAD recalled that developing countries must invest 1.7 trillion dollars annually in renewable energy and added that, despite this urgency, foreign direct investment in the sector barely reached 544,000 million dollars in 2022.

On the other hand, he stressed the need to debt relief for developing countries so they can invest in a clean energy transition and attract international private investment through better country risk ratings.

The report specified that the investment deficit of developing countries for the energy transition is 2.2 trillion dollars a year, while the annual gap to meet the Sustainable Development Goals is 2.2 trillion dollars.

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Written by Editor TLN

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