UN World Investment Report 2010 - Office of Trade Negotiations

46
FDI inflows to Latin America and the Caribbean
decreased by 36 per cent to $117 billion
in 2009 (table B), following three consecutive
years of growth. The decline – which
reflected the impact of the global economic
crisis on investment, trade and profits – occurred
across the region. This was due in
part to the 18 per cent decrease of income on
FDI from $94 billion in 2008 to $77 billion
in 2009, which affected reinvested earnings
that had become the main driver of FDI inflows
to the region in recent years (WIR08).
The drop of cross-border M&As sales that
reached negative values in 2009 (table B)
also contributed to a decrease in FDI. Brazil
remained the region’s largest FDI recipient
in 2009, although inflows dropped by 42 per
cent to $26 billion (table A).
The negative values of cross-border M&A
sales indicate that the sales of foreign affiliates
located in the region to domestic
companies surpassed those of domestic
companies to foreign TNCs. Sales of foreign
affiliates to domestic companies were valued
at over $14 billion in 2009, the largest
in developing regions and more than twice
that in South, East and South-East Asia.
Acquisitions of foreign affiliates by local
companies took place mainly in Brazil (53
per cent of the total), the Bolivarian Republic
of Venezuela (23 per cent) and Colombia
(17 per cent), and in finance (25 per cent),
metallurgy (23 per cent), electric services
(19 per cent), petroleum (14 per cent) and
mining (5 per cent).
FDI outflows decreased by 42 per cent to
$47 billion in 2009, mainly due to Brazil’s
large negative outflows of $10 billion (fig.
B). Brazil’s negative outward investment
resulted from a surge in intra-company loans
from Brazilian affiliates abroad to their parent
companies (section ii). Outflows from
offshore financial centres represented more
than 70 per cent of the region’s total. The
British Virgin Islands was the largest outward
investor with $27 billion, followed by Chile
and Mexico with almost $8 billion each.
World Investment Report 2010: Investing in a Low-Carbon Economy
Cross-border M&As purchases by Latin
American and Caribbean firms increased by
52 per cent, to $3.7 billion (table E), driven
by acquisitions from companies in mining
and petroleum, as well as food and beverages
(table D). Acquisitions largely concentrated
in the United States, while the divestment
trend initiated in 2008 in this country continued
in Europe in 2009(table E).
With regard to policy measures, in parts of
Latin America and the Caribbean governments
strengthened the role of the State
in their economies. This was the case for
the petrochemical industries (Bolivarian
Republic of Venezuela), but also affected
other industries. For instance, a number
of nationalizations were observed in the
energy sector and financial services (e.g.
the Plurinational State of Bolivia and the
Bolivarian Republic of Venezuela).
On the other hand, there were also moves
towards further liberalization, including in
the financial sector (e.g. Brazil) and the
telecommunications sector (e.g. Bahamas
and Costa Rica). Measures were also taken
to promote foreign investment in the region.
These included tax incentives, for instance
for the promotion of specific sectors or regions
(e.g. Mexico and Peru), and free zone
reforms (e.g. Costa Rica).
Prospects for FDI inflows to Latin America
and the Caribbean are improving in 2010, as
the region is recovering relatively rapidly
from the global financial and economic crisis.
Flows are expected to recover faster in South
America, a subregion more reliant on commodities
and exports to emerging markets,
where demand is picking up strongly. FDI
inflows to the region are likely to continue
increasing in the medium term, given the
resilience and growth potential of Latin
American economies. Brazil and Mexico,
in particular, remain among the top 10 FDI
destinations for TNCs (chapter I). Quarterly
inflows data for three major recipient countries
24 show a recovery since the last quarter