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report, ECLAC noted, “Although nearly all the countries [in the LAC region] saw FDI flows reduced, the total fall for the region is concentrated in Brazil, where
a significant part of foreign investment has been traditionally oriented towards the development of market-seeking activities.” The only LAC countries that saw a 2015 increase in FDI were Hon- duras, Panama, and El Salvador, making Central America the only sub-region with a net gain in foreign investment.
UPS AND DOWNS IN LATIN AMERICA
Peru’s positive performance
Peru significantly outperformed other Latin American countries in direct investment in 2014, as FDI increased 28 percent year over year. According
to Esteban Chong, a senior partner at PricewaterhouseCoopers, Peru’s invest- ment performance could be attributed to its economic liberality, notably citing the government’s spending on public infrastructure and reduced taxes, which have created economic growth in the wake of rising commodity prices. It
is also worthy of note that Peru was ranked as second only to Colombia in the World Bank Group’s ease of doing busi- ness rankings for the Latin American region and is currently ranked seventh by Bloomberg among the world’s most attractive emerging markets. Peru’s FDI has dropped 11 percent through August 2015, but compared to most other LAC countries, it is still commanding signifi- cant investment.
Divestments and declines in Mexico
In contrast to Peru, Mexico had the greatest loss of investment of all coun- tries in the region for 2014. It is import- ant to note, in considering the decrease, that numbers were inflated the prior year due to the acquisition of beer maker Grupo Modelo by a European company. Significant as well to the drop from 2013 to 2014 is that AT&T divested itself of holdings in América Móvil (a loss of US $5.6 billion). As noted above, this drop has been significantly ameliorated in 2015.
Good and bad in Guatemala
For Guatemala, foreign direct invest- ment increased to US $1.4 billion in 2014, the highest number ever recorded for the country. However, FDI dropped through August of 2015 by 26 percent. Energy received greater investment than natural resources, capturing 24 percent of the inflows, as opposed to 23 percent for natural resources. Retail received
15 percent of inflows, and manufactur- ing dropped to 13 percent. Some of the investments in Guatemalan industries include the construction of a ferronickel mine (US $300 million), a port enlarge- ment (US $252 million) related to the expansion of the Panama Canal, and additional mining investments.
Elsewhere in Latin America
Argentina saw a boost in FDI in 2015, but this was largely thanks to an ac- counting procedure describing Spanish company Respol’s divestment of oil firm YPF, an event that actually occurred in 2014. Discounting those numbers, FDI in Argentina has actually dropped 11.5 percent over the same period in 2014. Inflows to Bolivia, Costa Rica, and Nic- aragua were fairly stable in 2015, each losing less than 5 percent over 2014.
STRUGGLES IN THE CARIBBEAN
Unfortunately, most Caribbean countries are suffering with low FDI and a lack of government funds to improve econo- mies. National debt, on average, reached 78.6 percent of GDP, and Jamaica even experienced national debt of 100 percent GDP. FDI in the entire region decreased by almost US $300 million from 2013 to 2014.
Heavily dependent on tourism, the Caribbean is still seeing investment in resorts, hotels, and vacation proper- ties, particularly in countries like the Dominican Republic, the Bahamas, and Barbados. FDI in the Dominican Repub- lic’s tourism industry began declining
in 2009 but has picked up since 2013. Even with a surplus in accommodations for tourism-heavy islands and increasing competition from other vacation spots
Latin American Countries: Investment as a % of GDP
source: IMF 28.3
25.7
24.2
23.7
19.2
Peru Chile Mex Col Brazil
According to the Council on Foreign Relations, although FDI in Latin America is down, the destination mix for investments in 2014 was encouraging, with nearly half going to services, 36 percent to manufacturing, and the rest to natural resources.
22 STRATEGY