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2020.12.03 14:30 GMT+8

Foreign investment in Latin America to drop by about half in 2020: report

Updated 2020.12.03 14:30 GMT+8
Bertram Niles

Latin America and the Caribbean will experience the largest drop in foreign direct investment (FDI) this year of up to 55 percent, a new report has said.

"As a consequence of the crisis derived from the COVID-19 pandemic, we are expecting a fall of between 45 percent and 55 percent," the Chile-based Economic Commission for Latin America and the Caribbean (ECLAC), a United Nations agency, said in the report released on Wednesday. 

"In the context that global FDI is going to fall by 40 percent, we are falling more than the world; that's what matters," ECLAC Executive Secretary Alicia Barcena said.

"The fall is very big and important, and not only because of the pandemic, which plays a role without a doubt, but business strategies are changing." 

The agency pointed out that foreign investment flows into Latin America and the Caribbean had actually been falling since reaching a historic high in 2012.

The precipitous decline this year reflects the devastating impact the pandemic has had on several nations in Latin America, one of the hardest-hit regions in the world with infections exceeding 12 million and deaths 400,000.

ECLAC said the structural problems of the region's economies require FDI allied to policies that drive progressive change and lead to greater productivity, social inclusion and environmental sustainability.

"[FDI] offers great opportunities to move towards a new sustainable economy," Barcena said. "It is urgent we recover the role of industrial policy as an instrument of transformation."

In June, the UN trade body, UNCTAD, said it expected that commodities, tourism and transportation would be among the sectors most severely hit in the area as a result of FDI cutbacks.

In 2019, Brazil, Mexico, Colombia, Chile and Peru received the majority of foreign direct investment.

The picture was mixed across the region. In 17 countries, inflows declined from 2018, while in nine others, they increased, ECLAC said.

One development highlighted by the report was that of all sectors, renewable energy accounted for the highest number of FDI project announcements during the last five years.

More broadly, international agencies say the pandemic has had a relatively larger economic impact on Latin American and Caribbean economies because comparatively more people work in close physical proximity to each other and fewer have jobs that permit remote working.

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