Foreign Direct Investment in Latin America and the Caribbean 2017

Foreign Direct Investment in Latin America and the Caribbean • 2017
I
Chapter I
23
A. 2016: a turning point in globalization
The 12 months since the publication of Foreign Direct Investment in Latin America
and the Caribbean 2016 represent a turning point in the perception of globalization
and its economic and social effects. Political events, such as the referendum in the
United Kingdom which resulted in the vote to leave the European Union (Brexit) and
the presidential election in the United States, reflect trends that developed over time in
global production and trade. The difficulties of large middle-income sectors in developed
countries resulted from years of slow growth, high unemployment —particularly among
young people—, wage stagnation or deterioration and pressure from migratory flows
of a magnitude not seen since the end of the 1940s.
These events were accompanied by widespread acknowledgment that the
technological revolution has picked up pace and is now universal. Only a few years ago,
terms such as robotics and artificial intelligence were associated with a distant reality,
whereas they are now included in all forums and discussions on economic growth,
employment and equality. The World Economic Forum’s dissemination of the concept
of the fourth industrial revolution has resulted in the technological dimension being
incorporated into political concerns, or at least the political discourse.
The combination of these political and economic factors has increased the pressure
to relocate production to developed countries and set off a trend towards economic
nationalism, which was unthinkable less than two years ago. China’s productive,
technological and geopolitical progress —as well as its consolidated position as the
world’s second-largest economy— has strengthened resistance to globalization, which
was already reflected in weaker growth in global production chains, owing partly to
increasing interest in the advantages deriving from the close proximity of production,
research, development and innovation activities to one another. At the same time,
although the growing weight of global digital platforms in goods and services production
and consumption reduces barriers to entry to third markets and increases competition,
national economies reflect various levels of openness in terms of production, trade
and investment.
Against the backdrop of a rapid technological transition and greater interest in
keeping production at home, growing competitive pressure is redirecting businesses
towards more technology-intensive markets. Greater competition and pressure to
innovate stimulate foreign investment in quality assets (patents and highly-skilled
human resources) which are more abundant in the triad comprising the United
States and the advanced regions of Western Europe and East Asia where products
and production processes are manufactured and where standards are set and later
disseminated. As shown in figure I.1, this triad combines manufacturing, technological
research and development, and training of highly-skilled human resources in the
world’s 500 leading universities.
Against the backdrop
of a rapid technological
transition and greater
interest in keeping
production at home,
growing competitive
pressure is redirecting
businesses towards
more technologyintensive
markets.