10/24/2014 14h52

Investment down in Latin America, but up in Brazil

Eclac says the region received a total of US$ 84 billion in H1, a decline of 23%. The negative result was mainly driven by Mexico.

Brazil-Arab News Agency

The flux of foreign direct investment (FDI) to the 13 countries of Latin America and Caribbean amounted to slightly above US$ 84 billion in H1 2014, down 23% from H1 last year, according to data released this Thursday (23rd) by the Economic Commission for Latin America and the Caribbean (Eclac).

 The FDI influx to Brazil, however, is expanding. The country was targeted by US$ 42 billion in investments from January through August 2014, up 8% from the first eight months of 2013, according to the Eclac and Brazil's Central Bank. The organization used previously disclosed data spanning the period from January through August to evaluate Brazil and Chile, while data from January through July was used to assess the other countries.

 The month of August was especially favourable for Brazil. The FDI inflows amounted to US$ 6.84 billion, up 81% year-on-year in August. Total FDI inflows in 2013 amounted to nearly US$ 64 billion and the government estimates 2014 will end with similar figures. Brazil is the nation which is attracting most foreign investments in the region.

 According to the Eclac, the negative result in the region was mainly fuelled by Mexico, which had a 66% decline in FDI influx. The reason for this is that the amount received by the country in H1 2013 was exceptionally high as a result of the acquisition of the Mexican brewery Modelo by the Belgian-Brazilian AB InBev. Furthermore, H1 2014 saw a divestment close to US$ 4.5 billion as North American AT&T sold its stake in Mexican América Móvil.

 In addition to the lack of major transnational M&A operations, the Eclac ascribes the decline in FDI inflows to the region to the interest in the mining sector cooling off due to the collapse of metal prices at the global market.

 In Chile, for instance, where mining is especially important, foreign domestic investments declined by 16% from January through August this year, when compared to the same period of 2013.

Argentina, in turn, had a net outflow of US$ 55 million caused by the divestment of Spanish Repsol in Argentinian oil company YPF.

 The Eclac also points out that the FDI declined in Peru (18%), Costa Rica (21%), El Salvador (67) and Venezuela (54%), but increased by 9% in Uruguay, 10% in Colombia and 26% in Panama. Increments were also seen in Guatemala (3%) and the Dominican Republic (20%).

 In contrast to the performance in the region, the organization says global flow of FDI increased by 10% throughout this year, mainly due to the resume in investments in developed countries. It is worth noting that global flow is still below the record seen in 2007, prior to the international financial crisis.

Latin money

 On the other hand, direct investments made by the countries in the region abroad increased by 78% to US$ 17.6 billion, after having declined last year. According to the Eclac, except for Mexico, all nations with “major trans-Latin” businesses have increased their financial contributions abroad. For Chile and Brazil, once again data from January through August was used, while data from H1 was used for the remaining countries.

Brazil’s FDI outflows were positive in the first eight months of 2014 for the first time since 2010. The total posted was US$ 1.344 billion. The organization said negative debt flow between Brazilian businesses’ headquarters and branches are similar to figures seen in 2013, which shows the trend to contract financing abroad continues, but this trend was offset by the hike of 48% in financial contributions made from Brazil.