Foreign Direct Investment in Latin America and the Caribbean 2015

Foreign Direct Investment in Latin America and the Caribbean • 2015
Figure I.17
Latin America and the Caribbean: foreign direct investment as a proportion of GDP, 2014
(Percentages)
12
10
8
6
4
2
0
Chapter I
Panama
Chile
Nicaragua
Honduras
Uruguay
Colombia
Costa Rica
The Caribbean
Peru
Brazil
Latin America
Guatemala
Bolivia
(Plur. State of)
Mexico
Argentina
El Salvador
Paraguay
Ecuador
Venezuela
(Bol. Rep. of)
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures and estimates as of 18 May 2015.
Economic growth slowed from 2.5% in 2013 to 0.1% in 2014, but FDI inflows were affected little, reflecting
the long-term confidence of foreign investors. Still, the slowdown did cause FDI income (the profits made by
transnational corporations in the country) to fall to US$ 25.105 billion, down 9% on 2013, according to the fifth
edition methodology. Under the newer methodology, FDI income reached US$ 35.803 billion, but again, there is
no comparable number available for the preceding years. The drop in profits was especially heavy in the automotive
sector, which has traditionally been among the most profitable for foreign companies. FDI income in this sector
alone plummeted from US$ 3.29 billion in 2013 to only US$ 884 million in 2014, reflecting declines in vehicle
registrations (7%), production (15%) and exports (40%). This contraction was due mainly to more restricted access to
credit and lower demand in Argentina, the sector’s leading export market. The National Association of Motor Vehicle
Manufacturers of Brazil (ANFAVEA) expects a similar performance in 2015.
Despite these troubles, the automotive sector received FDI inflows worth US$ 4.221 billion in 2014, 11 a new
record high, as most auto assemblers went ahead with the expansion plans announced in previous years (see box
I.2 of ECLAC, 2014b). In manufacturing, the coke, oil derivatives and biofuels sector was the largest recipient of FDI
with inflows worth US$ 17.278 billion. Other major manufacturing sectors include steel (US$ 4.692 billion) and
chemical products (US$ 3.916 billion).
In services, the sectors that received the most FDI were retail (US$ 6.943 billion), telecommunications
(US$ 4.167 billion) and financial services (US$ 3.170 billion). The largest transaction in financial services was the
acquisition by Banco Santander of a 14% stake in its subsidiary Banco Santander Brasil. The Spanish bank made use
of the opportunity provided by a depressed share price.
This operation by Santander, as well as increased investments by Iberdrola in electricity services, is behind the
sharp rise in FDI flows from Spain, which reached US$ 6.356 billion. In 2014, Spain was Brazil’s second largest
FDI source country after the United States, excluding the Netherlands and Luxembourg, which act as a conduit
for sizeable FDI flows from third countries. In 2014, FDI from China climbed to US$ 1.161 billion on the back of
increased investments in oil, electricity distribution and manufacturing.
In natural resources, FDI increased in mining, but dropped substantially in oil and gas exploitation. In the successful
auction of the Libra field in late 2013, Total (from France), Shell (United Kingdom/the Netherlands), the China National
Offshore Oil Corporation (CNOOC) and China National Petroleum Corporation (CNPC) acquired rights to a 40% stake
in the field and paid a signing bonus of US$ 7 billion. The consortium (led by the State-owned Petrobras with its 60%
stake) committed to invest US$ 400 million between 2014 and 2016. Still, the effect of lower oil prices has been felt in
Brazil, and foreign companies have grown more reluctant to increase investments in oil exploration and exploitation.
11
The sectoral figures are calculated on basis of the sixth edition methodology, but exclude reinvested earnings. The inflows for which
sectoral distribution is available total US$ 86.153 billion.
37