Foreign Direct Investment in Latin America and the Caribbean 2017

60 Chapter I Economic Commission for Latin America and the Caribbean (ECLAC)
of the total, with most of the investment coming from Germany, Spain, France and
the United Kingdom, although there was a decline in flows from Germany. However,
investments from Latin America fell 9% in 2016, representing 18% of the total, with
Panama as the main source, providing 10% of the total.
According to fDi Markets, announced investment remained at a similar level to that
of 2015. There were only a few large-scale projects, with only 5 of 97 announcements in
2016 valued at over US$ 100 million, specifically the expansion of oil extraction activities,
valued at US$ 660 million, by GeoPark, a Bahamas-based company that operates in
several Latin American countries; two shopping centre investments by Chile’s Parque
Arauco and Cencosud, worth US$ 226 million and US$ 150 million, respectively; and
investments in telecommunications by the United States firms Level 3 Communications
and MVS USA, for a data centre project and a satellite telephone project, both worth
around US$ 150 million.
Recent FDI trends are positive and, excluding the sale of ISAGEN, which was
accounted for in the first quarter of 2016, by March 2017 FDI inflows had grown 8.1%
year-on-year. The rebound in flows to the manufactures sector made it the leading
recipient in the first quarter (28% of the total), overtaking the oil sector, which was
relegated to second place (24%).
In 2016, FDI in Chile fell for the second year in a row and recorded its lowest level
in 10 years after dropping by 40.3%, to US$ 12.225 billion. This was mainly due to the
fall in intercompany lending —one of the most volatile components of FDI— which was
down 72% and accounted for 23% of the total. Reinvested earnings fell slightly (5%)
and accounted for 29% of total revenues, while capital contributions also declined,
albeit at a slower pace (10%), and accounted for about half of total FDI flows.
Although at the time of publication information disaggregated by economic sector
was not available, according to the report by the Central Bank of Chile, Balanza de Pagos,
Posición de Inversión Internacional y Deuda Externa Resultados al primer trimestre 2017
(2017), the largest recipients of FDI were mining, transport, and electricity, gas and water.
The trends in cross-border mergers and acquisitions confirmed the importance of
the services and financial sector in a market that witnessed greater activity in 2016,
with transactions valued at US$ 5.4 billion. The largest transaction was the purchase of
the Autopista Central highway concession by Spain’s Abertis from Canadian firm Alberta
Investment Management Corporation (AIMCo), for US$ 1.028 billion, which allowed
the Spanish company to gain control of the six concessions it has in Chile —its third
largest market in terms of income, after Spain and France. The second largest was the
sale of a 40.2% stake in the Chilean pension fund management firm AFP Habitat to
the United States insurer Prudential Financial, Inc., for US$ 625 million. A similar figure
(US$ 613 million) was paid by Qatar Airways for a 10% stake in the Chilean-Brazilian
airline Latam Airlines Group S.A.
According to fDi Markets, investment announcements fell 36% in 2016, although
their value was higher than in 2014. About a quarter of the projects announced in Chile
involve investments of more than US$ 100 million, and announcements for this level
of investment have remained relatively stable in the last decade, at around 18 per year
(16 projects of this magnitude were announced in 2016). As in 2015, renewable energy
was the most attractive sector for greenfield projects, accounting for 70% of announced
investment values. In the energy sector, the Irish firm Mainstream Renewable Power will
invest US$ 1.65 billion in new wind farms after it was awarded 20-year power purchase
contracts to supply 3,366 GWh per year, allowing it to start providing energy to the
Chilean grid from 2021 and 2022. The growth of renewable energies in the country
has been driven by foreign investment, mainly from European companies —in the last
10 years, 73% of the value of announced investments in renewable energies in Chile