In spite of the decrease of internal investment, Chile was placed in 2014 within the group of the 20 main receivers and issuers of direct foreign investment (DFI), according to the World Investment Report of the UNCTAD, informed this Wednesday by the Santiago Chamber of Commerce.
With regard to the reception of DFI, Chile reached the 11th position (21st in 2013), with earnings amounting to USD 23 billion. With regard to the outward foreign investment, it reached the 19th position (29th in 2013), being the only Latin American country within the main 20.
On a worldwide level, the report shows a 16% decrease in DFI flows, dropping to USD 1,230 billion in 2014. According to the report, the drop is explained by the fragility of the world economy, political uncertainty for investors and a complex geopolitical scenario.
United States, which was the main receiver of foreign investment in 2013, lost ground and dropped to the third place, being overtaken by China, which reached USD 129 billion, and Hong Kong, which reached USD 103 billion.
Developing economies attracted USD 681 billion of direct foreign investment and continue being the main destination of global investment flows, with an aggregate of 56%. In addition, they reached a record of 35% of outward DFI, well above the 13% they reached in 2007.
In spite of the gloomy economic picture of 2014, the report anticipates a sustained recovery of DFI worldwide and forecasts a 11% increase for 105, reaching USD 1,400 billion. The report also forecasts new rises up to USD 1,500 billion in 2016 (8%) and USD 1,700 billion in 2017 (16%). Developed countries should experience a great flow increase during this year (higher than 20%), in consistency with greater economic activity. DFI inward for developing countries, in turn, will continue in high levels, increasing an average of 3% for the upcoming two years.
In Latin America and the Caribbean, after four consecutive years of growth, direct foreign investment flows (DFI) decrease in 14%, dropping to USD 159 billion in 2014 (without including the Caribbean´s transnational financial centers).
According to the report, this was due mainly to a 72% decrease of cross-border mergers and acquisitions in Central America and the Caribbean, as well as to the price fall of basic products, which reduced the investment in South America’s extractive industries. In this sub-region, investments continued falling for the second consecutive year, 4% to USD 121 billion, and all receiving countries, except for Chile, registered inward DFI falls.
Brasil registered a small decrease of inward DFI for the third consecutive year, but continued being the first DFI destination in the region with income for USD 62 billion (-2%).
Chile recovered its position as the second destination of inward DFI in the region (overtaking Mexico). Investments increased a 38%, reaching USD 23 billion, propelled by exceptionally high levels of mergers and acquisitions, which were tripled, reaching around USD 9 billion. Only two specific transactions, one in the pharmaceutical sector and another in the energy sector (natural gas), added up over USD 6.5 billion. Foreign investment destined to the development of new projects in Chile, however, fell dramatically, from over USD 10 billion in 2013 to less than USD 6.6 billion (-35%).
In spite of the above, the size of acquisitions of local companies and the decrease of internal investment allowed foreign investment to reach a record proportion of 40% of Chile’s gross capital formation, well above 25% in 2013.
In case of outward DFI, DFI flows from Latin American countries decreased in 18%, to USD 23 billion, dragged by the reduction to halve ofthe value of cross-border acquisitions (USD 8.4 billion).
In 2014 Chile was the main direct investor of the region overseas, with outward investments increasing in 71%, to USD 13 billion. Mexico, the second bigger investor overseas in the region, registered a 60% decrease of outward DFI, to USD 5 billion.
The report concludes that, after over a decade of strong growth propelled by South America, DFI prospects nin Latin America and the Caribbean looks bleak.
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