Report: Latin America Suffers a Decline in FDI Inflow

Foreign direct investment (FDI) in Latin America fell by an average of 23% in the first half of this year, in contrast to the developing countries elsewhere in the world that are projected to see FDI increase by 10% this year.

According to the data released by the Economic Commission for Latin America and the Caribbean (ECLAC), the absence of big corporate acquisitions and a slowdown in mining investments are the factors to blame.

The countries in Central America have been particularly hard hit, with El Salvador, for example, seeing its FDI fell by 67%.

For some countries in LAC region, the biggest concern is not their declining FDI but their increasing capital outflow. Argentina — reeling from a host of economic troubles, including inflation, currency depreciation and debt repayment default — saw its capital outflow rise by 105%.

Except for Mexico, where outward investment flows dropped 18%, every country in the region saw their FDI outflow rise during the assessed period.

According to the data, Mexico’s current FDI inflow is similar in size to that of the previous five years, while Brazil recorded an 8% increase in foreign investment in the first eight months of this year. However, ECLAC estimates indicate that Brazil’s annual inflows will be similar to those of the previous year.

Thanks to cooling demand for copper, FDI inflows decreased by 16% in Chile between January and August. FDI inflows also decreased in Peru (-18%) and Costa Rica (-21%).

However FDI grew 9% in Uruguay, 10% in Colombia and 26% in Panama, countries where these flows had already been very high in 2013. Guatemala, Honduras and the Dominican Republic also showed modest increases in FDI received.

In Brazil, outward direct investment during the first eight months of the year was positive for the first time since 2010. Outward FDI also increased slightly in Chile (8%) and significantly in Venezuela (29%), Colombia (65%) and Argentina (105%).