Foreign direct investment (FDI) in Latin America fell by 34.7% in 2020, the worst inflow of capital since 2010, as a result of the coronavirus pandemic, reported the Economic Commission for Latin America and the Caribbean (ECLAC).
The region was “one of the most affected in the world”, the organization said in its report, in which it recorded a reduction of US$ 56 billion compared to 2019.
“We are talking about a big drop, a trend that has been decreasing since 2013,” said the executive secretary of Cepal, Alicia Bárcena, during the presentation of the report.
In total, 105.4 billion dollars in FDI entered Latin America in 2020, which “represents a second consecutive year of decline”, according to the report, due to the “stagnation” of investment inflows observed since 2010.
The decline in 2020 is only comparable to that of 2009 in the context of the global economic crisis.
Only five countries in the region increased foreign capital inflows in 2020: Bahamas and Barbados in the Caribbean; Ecuador and Paraguay in South America; and Mexico.
“Mexico becomes the second recipient of foreign direct investment after Brazil. Brazil is still the first, but in this case it had a sharp drop of 35.4%, and this weighs heavily on the regional average”, said Bárcena.
FDI in Central America fell 89.4%, in South America it fell 40.4% and in the Caribbean it decreased by 25.5%.
“At a time when the region needs investments that allow it to move towards a sustainable recovery and foreign investment could play a favorable role, investments by transnational corporations have reduced”, highlights the ECLAC report.
In sectoral terms, the biggest reduction in FDI was in natural resources, with a decrease of 47.9% compared to 2019. It is followed by the manufacturing industry (-37.8%) and services (-11%).
The origin of foreign capital remains mainly from Europe, although it has risen from almost half in 2019 to 38%; while the United States increased its share by 10 percentage points, accounting for 37% of capital flows to Latin America.
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