Foreign direct investment (FDI) in Latin America and the Caribbean decreased by 35% in 2020, with natural resources and manufacturing sectors being the worst hit.
Barely five countries in the region saw an increase in foreign inflow: the Bahamas and Barbados in the Caribbean, Ecuador, and Paraguay in South America.
Thanks to its free trade agreement (USMCA) with the United States, Mexico also turned out to be a major recipient, according to a study released by the Economic Commission for Latin America and the Caribbean (ECLAC).
Natural resources, traditionally the biggest source of dollar money for the region, suffered a staggering 47% decline.
Interestingly, FDI projects experienced a rebound between September 2020 and February 2021. However, from that month to May 2021, it appears that a new drop occurred in the value of the announcements made. “In this scenario, it is difficult to imagine that FDI inflows into the region could increase by more than 5% in 2021,” ECLAC’s report stated.
The UN agency has urged governments in the region to promote renewable energy, electromobility, digital revolution, and the healthcare manufacturing industry, saying that these sectors spark the most interest among foreign investors.
The good news is the United States was once again seen increasing its investment in the region. US investments jumped from 27 % in 2019 to 37% in 2020. In contrast, inflows from Europe declined from 51 % to 38 % during the same period.
Over the past years, foreign investments made little changes to the region’s productive structure, stated Alicia Bárcena, Executive Secretary of the UN agency, urging the governments to invest more money in technology and innovation.