Foreign Direct Investment in Latin America and the Caribbean 2017

Foreign Direct Investment in Latin America and the Caribbean • 2017
Chapter I
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Investment in financial services has grown steadily over the past three years and
accounted for 40% of FDI in 2016. The telecommunications and manufactures sectors
also received a significant share of foreign capital, 24% and 22%, respectively, up slightly
compared with 2015. Investments in commerce fell by 8%, accounting for 11% of the
total, while the share of FDI received by the maquila sector fell from 18% over the past
decade to 3% in 2016. The origin of investment was relatively diverse compared with
other countries of the region. Despite a drop in its outflows to Honduras, Panama was
the main investor (15% of the total). The United States and Mexico invested more in
Honduras, with each accounting for 14% of the total, while Colombia, Guatemala and
Luxembourg accounted for 12%, with only FDI outflows from Colombia decreasing.
In telecommunications, the Swedish firm Millicom, owner of the Tigo brand,
announced that it would expand its 4G network to reach 33% of the population in
2016, a project valued at US$ 220 million. The United States textile firm Nike, which
has seven factories in Honduras, announced the opening of a logistics centre in the
north of the country, a project worth US$ 40 million. Textiles, together with tourism,
agribusiness, business support services, intermediate manufacturing (spare parts) and
housing, has been a priority area for the proposed strategy to attract investment as
part of the Honduras 20/20 development plan, launched in 2016, which aims to secure
70% of the investment needed to fulfil its goals from foreign sources.
Although investment inflows to Nicaragua fell by 6.5% in 2016, total FDI
was US$ 888 million, higher than the average for the 2000s. Manufactures and
telecommunications remained the main recipients of foreign capital in 2016, with 31%
and 26% of the total, and values were similar to those of 2015 (manufactures investment
values dropped 2% and telecommunications rose 2%). Investment in commerce and
services fell by 7%, accounting for 16% of the total, while the energy sector made up
14% of total FDI, with a small increase of 3%. Mining investments have been falling
steadily over the past three years to reach negative territory in 2016, down from an
average 18% share of the total between 2011 and 2013.
According to fDi Markets, fewer projects were announced in 2016. Major
manufactures projects included the opening of a new plant by the Japanese auto
parts manufacturer Yazaki Corporation, which already has five factories in Nicaragua,
a project valued at US$ 27 million, and the new shrimp feed processing plant project,
valued at US$ 10 million, announced by the United States transnational company Cargill.
Next Level Apparel, a textile company based in the United States, opened a storage
and distribution centre to supply companies in Nicaragua and the United States, in a
project with associated investments in the amount of US$ 10 million. In the financial
sector, Banco de la Producción, a subsidiary of the Panamanian Promerica Financial
Corporation, expanded its activities in the country by opening new branches.
El Salvador received US$ 374 million of FDI in 2016, 6.2% less than the previous
year. However, this decline was rather unusual because capital inflows increased in
2016, up to US$ 457 million, meaning that the contraction in total FDI was due to the
decrease in intercompany lending, which was negative in 2016.
Analysis of sectoral trends shows that investment in manufactures accounted for
79% of the total, with a similar value to that of 2015 (up 1.2%). Within the services
sector, which accounted for the rest of the inflows, investments in the financial sector,
the main recipient, increased, investments in commerce dropped and there were
divestments in communications and electricity. The leading investors were Panama,
which doubled its level of investment compared to 2015 and accounted for 59% of
the total, the United States, with a 20% share despite a 71% decline in investments,
and Honduras, with 12% of the total.