Foreign Direct Investment in Latin America Drops Dramatically 1st Quarter, By $84 Bilion

Foreign direct investment inflows into the 13 Latin American and Caribbean countries with available data fell 23 percent in the first half of 2014 to $84.07 billion, the United Nations Economic Commission for Latin America and the Caribbean said Thursday.

FDI flows are expected to grow by 10 percent globally in 2014, however, thanks primarily to investment received by developed countries, according to ECLAC.

Among the factors contributing to a decline in FDI inflows to Latin America, the commission pointed to the “absence of big corporate acquisitions” during the first half of 2014, compared with the same six-month period of 2013.

Another key cause of the decrease in several countries was a deceleration in mining investment due to lower metal prices, it added.

ECLAC said Mexico, where Belgian multinational Anheuser-Busch InBev’s 2013 acquisition of the Modelo brewery for $13.25 billion provided an exceptional boost to FDI inflows, accounted for much of the regional year-on-year decline in the first six months of 2014.

Additionally, AT&T’s sale of its stake in Mexican wireless giant America Movil resulted in an FDI outflow of $4.5 billion and contributed to the overall regional decline.

“Beyond these atypical phenomena, Mexico kept receiving FDI flows at a similar level to that of the previous five years, with a large amount of inflows going to the export industry, particularly the automotive sector,” ECLAC said.

In Brazil, FDI was up 8 percent for the first eight months of 2014 compared to the same period of 2013, and official estimates indicate that annual inflows will be similar to those of the previous year.

In Chile, FDI flows fell 16 percent in the January-August period, continuing a trend that began in 2013.

“The fall was especially concentrated in the mining sector, which could persist this year, although flows are likely to increase in the last months of 2014 as a result of the acquisition of energy company CGE by Spain’s Gas Natural for $3.29 billion,” ECLAC said.

Argentina saw a net FDI outflow of $55 million due in part to Spanish oil major Repsol’s disinvestment in former unit YPF, which President Cristina Fernandez’s administration nationalized in 2012.

“Excluding this ownership change, equity capital contributions and the reinvestment of earnings (two components of FDI) totaled $4.29 billion, 20 percent less than the previous year,” ECLAC said.

Published in Latino Daily News