Foreign Direct Investment in Latin America and the Caribbean 2015

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Foreign Direct Investment in Latin America and the Caribbean • 2015 The especially large share recorded in 2014 is attributable to the great number of announcements in the automotive sector, particularly in Mexico. Such a large number of announcements in a single year is somewhat uncommon and 2015 may be expected to bring a return to the lower average of previous years. The share of medium-low-technology investment projects has dropped from 40% in 2008-2010 to 21% in 2014, owing largely to reduced investment in some heavy industries in certain large countries. Finally, the low-technology category displays no clear trend, varying between 18% and 26% in the periods covered by the figure. Figure I.12 Latin America (selected economies): technology intensity of announced investments, 2011-2014 (Percentages) 100 90 80 70 60 50 40 30 20 10 0 All-2014 Brazil Mexico Chile Colombia Argentina Venezuela (Bol. Rep. of) Low Medium-low Medium-high High Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Financial Times, fDi Markets. Figure I.13 Latin America and the Caribbean: technology intensity of announced investments, 2008-2010, 2011-2013 and 2014 (Percentages) 100 90 80 70 60 50 40 30 20 10 0 2008-2010 2011-2013 2014 Low Medium-low Medium-high High Source: Economic Commission for Latin America and the Caribbean (ECLAC) on basis of Financial Times, fDi Markets. 4. Largest investor countries The Netherlands has now become the largest single investor in Latin America and the Caribbean, accounting for 20% of all attributable 8 inflows, up from 14% in 2013. The share of the United States in FDI inflows, meanwhile, fell to 17%, down from 20% in 2013 and 25% in 2012. Naturally, this hides a large degree of intraregional variation. In Mexico, for example, the United States regained its position as top investor despite its share slipping from 30% to 29%. In 2013, it had lost its top position to Belgium, owing to the takeover of Grupo Modelo by Belgium’s Anheuser-Busch Inbev. In Brazil, the United States’ share of investment shrank to 13%, making the country the second largest investor after the Netherlands at 29% (see figure I.14). 8 Not all countries provide a disaggregation of FDI inflows by country of origin. Data in this section is based on those countries included in figure I.14 Chapter I 29
Economic Commission for Latin America and the Caribbean (ECLAC) Figure I.14 Latin America (selected countries and subregions): origin of foreign direct investment, 2014 (Percentages) 100 90 80 70 60 50 40 30 20 10 0 13 11 2 4 50 29 3 11 6 0 3 45 14 28 43 23 2 0 18 2 12 3 11 12 Brazil Mexico Colombia Ecuador Dominican Rep. Unknown Others Europe Japan Canada Latin America and the Caribbean United States 1 24 30 0 15 14 7 0 60 58 33 28 9 14 3 13 Central America a Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures and estimates as of 18 May 2015. a Central America includes Costa Rica, El Salvador, Guatemala and Honduras. The dominant position of the Netherlands reflects its prominence in the Brazilian market, whereas in other countries, it plays a much smaller role. Instead, Spain, which nearly quadrupled its share to 10% in 2014, is the largest European investor in other economies. In Mexico and Colombia, Spain is responsible for approximately 18% and 13% of inflows, respectively. Two of the largest M&As in 2014 were carried out by Spanish companies: Gas Natural Fenosa acquired 54% of Chile’s Compañía General de Electricidad for US$ 3.3 billion and Banco Santander expanded its share in Banco Santander Brasil by 14% for US$ 3.199 billion (see table I.2). The third large European investor, with 8% of total inflows, is Luxembourg, which is also particularly important in Brazil (10% of inflows). Not typically renowned as economic powerhouses, the Netherlands and Luxembourg act as conduits for investment from other countries. Ideally, these investment flows should be attributed to their original source countries, but this is not always possible. The data available therefore show that these two countries, and Ireland to a lesser extent, continue to play a large role. FDI from Asia increased in 2014, although this FDI cannot always be tracked easily or directly because some countries in Latin America and the Caribbean do not keep records on the origin of investment. For example, table I.2 shows that three of the largest M&As in 2014 were completed by Chinese companies, including the largest acquisition recorded during the year. However, two of these took place in Peru, whose central bank does not track the origin of investment. This leads to a significant underestimation of China’s role in FDI in Latin America and the Caribbean. ECLAC estimates that the region received FDI inflows of US$ 10 billion per year from China between 2010 and 2013. This figure was probably even higher in 2014 in view of the aforementioned acquisitions. Overall, FDI from Asia increased from 5% to 6%, with China’s share in recorded inflows to Latin America and the Caribbean increasing to 1% (see annex table I.A.3). Table I.2 Latin America and the Caribbean: 20 largest mergers or acquisitions, 2014 Amount (millions of dollars) Peru Switzerland Mining 7 005 Company Country of origin Assets acquired Asset location Seller location Sector 1 MMG Limited and partners China Glencore Las Bambas copper deposit 2 Royal Dutch Shell Netherlands and United Kingdom Repsol liquefied natural gas (LNG) portfolio 3 Gas Natural Fenosa Spain Compañía General de Electricidad (54%) 4 Banco Santander Spain Banco Santander Brasil (14%) 5 China National Petroleum Corporation (CNPC) Peru, Trinidad and Spain Oil 4 100 Tobago, Spain Chile Chile Electricity 3 300 Brazil Brazil Finance 3 199 China Petrobras Energía Perú Peru Brazil Oil 2 600 6 PPG Industries United States Consorcio Comex Mexico Mexico Manufacturing 2 300 7 Lundin Mining Corporation Canada Candelaria and Ojos del Salado mines (80%) Chile United States Mining 1 800 Chapter I 30
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