Foreign Direct Investment in Latin America and the Caribbean 2015

Foreign Direct Investment in Latin America and the Caribbean • 2015
settled until 2014. The government paid US$ 5.000 billion to Spain’s Repsol as compensation for the expropriation
of 51% of YPF. Repsol subsequently sold its remaining 12% share. With the return of the majority share to Argentina,
in practice, this implies a negative inflow in the balance of payments. If it were not for this transaction, inflows into
Argentina would have remained at a similar level to previous years. Reinvested earnings make up the bulk of inflows
and totalled US$ 7.365 billion. In mining, Canada’s Yamana Gold is in the process of investing US$ 450 million
in the Cerro Moro project near Puerto Deseado. Although recent data are not available, the sectoral distribution of
FDI in Argentina seems balanced between natural resources, manufacturing and services. The share of services has
increased in recent years, but manufacturing is likely to have gained ground in 2014.
Several automotive manufacturers have expanded their production facilities in Argentina recently. In October,
Japan’s Toyota announced it had completed 60% of its US$ 800 million investment plan announced in 2013, while
General Motors of the United States announced in 2014 that it would increase its earlier investment of US$ 450 million
to US$ 720 million. Lastly, Italy’s Fiat Chrysler announced the construction of a new engines plant in Argentina in
2013 at a cost of up to US$ 300 million.
According to industry specialists, Argentina has great potential for oil exploration, with the Vaca Muerta formation
touted as a particularly abundant source of both shale gas and shale oil. The government has announced several
special benefits to oil companies willing to invest more than US$ 1 billion. Since then, United States-based Chevron
signed an agreement with YPF to invest US$ 1.6 billion to explore the Vaca Muerta formation and Russia’s Gazprom
is rumoured to have offered US$ 1 billion of investments. The Vaca Muerta exploration is expected to require a
total investment of some US$ 15 billion. In December, Malaysia’s PETRONAS committed US$ 550 million to shale
gas cooperation with YPF (Mander, 2014). Finally, the Anglo-Dutch company, Royal Dutch Shell and France’s Total
announced an investment of US$ 550 million together with Gas y Petróleo de Neuquén, a local oil and gas company,
in a different field.
FDI inflows to Uruguay totalled US$ 2.755 billion in 2014, 9% lower than in 2013. Uruguay has received significant
investment in its renewable energy sector —testament to this was the completion of several large wind farms in 2014.
The country is scheduled to source 90% of its energy from renewable sources in 2015 and is among the global leaders in
the field, particularly with respect to wind energy. Recent large investors in wind farms include Argentina’s Corporación
América (50 MW), Spain’s Abengoa (50 MW and 70 MW), Germany’s SOWITEC (81 MW) and Italy’s ENEL (50 MW).
Manufacturing does not play a major role in Uruguay. Nevertheless, a new pulp mill was completed in 2014,
representing the largest single investment the country has ever received. The mill, a joint venture between Chile’s
Arauca and Swedish-Finnish Stora Enso, cost US$ 2.27 billion, plus US$ 230 million for the related port, and has
taken several years to complete.
Some large plans are on the table in Uruguay. A project by United Arab Emirates-based Zamin to develop an
iron mine for a cost of up to US$ 3 billion has been under discussion for several years. In direct relation to this, the
Government of Uruguay has been promoting the idea of constructing a new US$ 1 billion port on its Atlantic coast,
for which it is looking for investors.
FDI inflows to Ecuador increased by 6% to US$ 774 million, over two thirds of which was invested in the natural
resources sector. Manufacturing’s share shrank to only 14% of FDI inflows during 2014, while services fell from 43%
to only 18% of inflows. Oil exploration is currently undergoing a small boom in Ecuador. In October, contracts were
awarded to a number of international companies to work with state-owned Petroamazonas in order to explore for new
oil supplies. The government expects that US$ 2.1 billion will be spent on such exploration over the next five years.
The Ecuadorian food and beverage market has attracted significant interest from foreign firms. Holding Tonicorp,
a dairy products company, was acquired by Mexico’s Arca Continental, in a deal also involving Coca-Cola of the
United States. This acquisition was valued at US$ 400 million and Coca-Cola announced other plans in 2014 to
invest up to US$ 1 billion in Ecuador over the next five years. Arca Continental also announced its intention to invest
a further US$ 80 million in a new industrial plant.
In the financial sector, Panama’s Promerica Financial Corporation, which already operated a bank in Ecuador,
acquired 56% of Banco de la Producción, the country’s fourth largest bank. This could benefit the sector by raising
professional standards. Promerica already operates banks in many Central American countries, as well as in the
Cayman Islands and the Dominican Republic.
Chapter I
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