Foreign Direct Investment in Latin America and the Caribbean 2015

Foreign Direct Investment in Latin America and the Caribbean • 2015
United States-based AT&T was responsible for the divestment that resulted in a negative inflow in 2014 and was
also involved in some of the other large transactions affecting Mexico in 2014. In May, the company announced
its intention to acquire DirecTV, the United States’ leading satellite television provider, for US$ 48.5 billion. Since
DirecTV is a major player in several countries, including Mexico, the acquisition had to be approved by regulators
in these different countries. In Mexico, regulatory approval was complicated by the fact that AT&T also held an 8.3%
stake, and 24% of the voting shares, in América Móvil, another company that provides satellite television services.
AT&T therefore sold its stake to Inmobiliaria Carso, América Móvil’s holding company, for US$ 5.57 billion. AT&T
maintained its faith in the Mexican market, however, as demonstrated by its November agreement with Grupo Salinas
to acquire Iusacell, Mexico’s third largest mobile network, for US$ 2.5 billion. This acquisition was completed in
January 2015 and was therefore not included in the annual FDI inflows for 2014, whereas the US$ 5.57 billion
divestment was. All of this goes some way in explaining the fall in investment in Mexico, where the transport and
telecommunications sector posted a negative inflow of US$ 3.753 billion in 2014.
The heightened activity in the telecommunications sector in Mexico is partially driven by new anti-monopoly
legislation, under which the regulatory body may impose asymmetrical regulations and obligations on the “preponderant
agent”, defined as a party with market dominance. América Móvil is such a company, controlling 68% of the
mobile telecommunications market. The company can either reduce its market share by selling some of its assets or
continue to be the preponderant agent. In the first case, Bank of America estimates that such an operation could yield
US$ 10 billion (Telegeography, 2014) and could give a platform to a new (foreign or local) player. In the second case,
the anti-monopoly legislation may make it more attractive for new players to enter the market anyway, as it did for AT&T.
In manufacturing, the automotive industry is key (see box I.4 in ECLAC, 2014b), with Mexico now the world’s
seventh largest car producer. Of all the branches of manufacturing, the automotive industry was the largest FDI
recipient in 2014, absorbing US$ 4.308 billion of the US$ 12.87 billion total. Mexico was the subject of a wave of
new investment announcements from car makers from all over the world in 2014. Among the largest were investments
by the United States-based Ford and General Motors for US$ 2 billion and US$ 3.6 billion respectively, and by the
Republic of Korea’s Kia Motors (largely owned by Hyundai Motors) for US$ 1 billion. In a joint venture, Germany’s
Daimler and Japan’s Nissan are building a US$ 1.36 billion factory. Other expansion plans are under way from
Sweden’s Volvo and Japan’s Honda.
Inflows in the electricity sector are still small, totalling US$ 580 million in 2014, although this was higher
than the average of US$ 253 million per year in the five previous years. Spain’s Iberdrola announced investments
of US$ 5 billion, of which it has already disbursed US$ 1.5 billion, including US$ 950 million in wind farms with
2,000 MW of capacity. Furthermore, on the back of the reforms to the energy sector, IEnova, which is co-owned by
United States-based Sempra Energy, plans to invest US$ 3.2 billion in domestic infrastructure projects over two years,
while Canada’s TransCanada is involved in a US$ 1 billion pipeline construction project.
The services sector received approximately one third of all FDI inflows into Mexico in 2014, with financial services
being the dominant subsector, attracting 25% of all FDI inflows. The other services subsector with significant inflows
was hospitality, which received some US$ 825 million in FDI in 2014, primarily in the hotel sector.
4. Central America
FDI inflows to Central America, unlike those to South America, held relatively steady in 2014. In total, the subregion
recorded inflows of US$ 10.480 billion, 2% less than the year before. Once again, Panama was the largest recipient
of FDI, accounting for more than 45% of the Central American total. The largest rate of growth was observed in El
Salvador, whose inflows nearly doubled between 2013 and 2014. Costa Rica was the only country with decreased
inflows in 2014, though it continues to be the second largest recipient (see figure I.18)
Central America hosts a great deal of activity in the renewable energy sector. According to consulting company
IHS Technology, photovoltaic capacity in Central America rose from 6 MW in 2013 to 22 MW in 2014 and is expected
to jump to 243 MW in 2015, with Honduras leading the way. Investments in renewable energy, primarily by foreign
investors, are already having an impact on the region’s energy balance, even though solar energy still makes up a
very small portion of current electricity generation capacity. Hydropower continues to be the pre-eminent renewable
resource, wind energy also far outstrips solar energy, and even geothermal energy plays a part. Nevertheless, investment
in solar energy is increasing rapidly.
Chapter I
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