Foreign Direct Investment in Latin America and the Caribbean 2015

Foreign Direct Investment in Latin America and the Caribbean • 2015
products have limited tradability and investments in such subsectors thus seek to take advantage of local markets. On
the other hand, investment in export-oriented manufacturing makes use of local strengths, such as low-cost labour,
to produce products for export. This type of manufacturing is particularly prevalent in Central America, Mexico and
the Dominican Republic, from where many products are exported to North America. Export-oriented manufacturing
tends to materialize through greenfield projects undertaken by transnational corporations, whereas market-seeking
investment more often takes the form of mergers and acquisitions.
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Figure I.10
Latin America and the Caribbean (selected countries) and rest of the world:
distribution of major mining projects, a late 2014
(Percentages)
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Copper Gold Iron ore Nickel Silver
Rest of the world Rest of Latin America and the Caribbean Peru
Mexico Chile Argentina
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of on the basis of S. Walker, “Pulling back across the board”, Engineering
and Mining Journal, 16 January 2015.
a
These figures represent the value of mining projects that are currently under way, but at different stages of development. There is no guarantee that these projects
will be completed.
The automotive sector can be the recipient of either type of investment. It is a sector dominated by transnational
corporations: all the assemblers in the region and the largest auto parts makers are foreign-owned. Most production
takes place in Mexico and Brazil and FDI inflows into the sector in both economies have grown significantly since 2012.
From 2003 to 2011, inflows into the automotive sector in the two countries combined averaged US$ 2.909 billion per
year, rising to US$ 4.028 billion in 2012, US$ 5.791 billion in 2013, and a record high of US$ 8.031 billion in 2014.
Mexico’s automotive plants are deeply integrated with those of the United States and Canada, its co- signatories in
the North American Free Trade Agreement. Mexico exports 82% of its production, compared with only 11% for Brazil.
Brazil’s automotive industry is integrated with its neighbouring Southern Common Market (MERCOSUR) members. More
than 57% of Brazil’s automotive exports go to other MERCOSUR members. More than 80% of automotive exports from
Argentina, Paraguay and Uruguay are within MERCOSUR, mostly to Brazil. Argentina is the only other MERCOSUR
country to have a sizeable automotive industry (which has been growing in recent years). Uruguay exports assembled
vehicles to Brazil and Paraguay has specialized in the production of tyres, exports of which have averaged US$ 17 million
a year since 2009. Several companies announced new investments in Paraguay recently (in tyres and other auto parts),
suggesting growth potential in the auto parts industry there in the coming years (see section D.2 for details).
For the first time in three years, services are again the largest recipient of FDI, absorbing 47% of inflows in those
countries that report data disaggregated by sector. The services sector is relatively diverse, and includes financial
services, business process outsourcing (BPO), electricity generation, infrastructure and tourism. Each of these
receives significant FDI inflows, although the distribution differs significantly in each economy. In the Caribbean,
for example, BPO and tourism are particularly important, although disaggregated data are often not available. These
two sectors, which are not particularly capital-intensive, are pivotal for the Caribbean because of their capacity to
create employment. Chapter II addresses the Caribbean in more detail and explores some of the key features of BPO
and tourism in the subregion.
The financial services sector is not generally considered to be capital-intensive, but it is a very valuable sector
and one in which many mergers and acquisitions take place. In 2014, for example, Chile’s Corpbanca acquired
Chapter I
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