Foreign direct investment (FDI) in Latin America and the Caribbean rose to US$208 billion in 2022, up 51% from the previous year and a record number for the region, according to the United Nations Conference on Trade and Development (UNCTAD).
The increase was driven by a number of factors, including an improving business climate and rising demand for commodities.
Much of the investment came from the United States, Spain and the Netherlands. Interestingly, China was not mentioned in UNCTAD’s report.
Developing countries face a $2.2 trillion annual funding gap for energy transition, according to a new report @UNCTAD.
— UN Environment Programme (@UNEP) July 6, 2023
The manufacturing sector was the largest recipient of FDI in the region, followed by the extractive and automotive industries.
Cross-border mergers and acquisitions (M&A) also increased in 2022, reaching a value of US$15 billion.
Brazil was the top recipient of FDI in the region, with inflows of US$86 billion, up 70% from 2021. The country’s strong economic growth and abundant natural resources attracted investment in a variety of sectors, including mining, manufacturing and energy.
Argentina also saw a significant increase in FDI. Its inflows more than doubled from the previous year, reaching US$15 billion. Investors are betting on Argentina’s potential as a major agricultural and energy producer as the government takes steps to improve the business climate.
Mexico was the second largest recipient of FDI in the region, with inflows of US$35 billion. The country is an attractive destination for foreign investors due to its proximity to the United States and its large and growing market.
The Caribbean also had a strong year for FDI, with inflows of $3.9 billion, up 53% from 2021. With inflows of $4 billion, the Dominican Republic was the top recipient of FDI in the region.
Among regional groupings, the Asociación Latinoamericana de Integración (ALADI) saw the largest increase, with FDI up 34% to US$195 billion. A significant increase of 35% to US$105 billion was also recorded by the Mercado Común del Sur (MERCOSUR). FDI flows doubled to $6.5 billion in the Caribbean Community (CARICOM).