Foreign investment in Latin America rises 55% and breaks a record in 2022 |  Economy |  America

Foreign investment in Latin America rises 55% and breaks a record in 2022 | Economy | America

ECLAC officials during a press conference
ECLAC officials during a press conference at the Commission’s headquarters in Chile, this Monday.@cepal_onu (RR SS)

Foreign Direct Investment (FDI) in Latin America and the Caribbean increased by 55.2% between 2021 and 2022, reaching 224,579 million dollars, the highest value since the Economic Commission for Latin America and the Caribbean (Cepal) has recorded it. , part of the United Nations. FDI to the region did not exceed 200,000 million dollars since 2013, “that makes 2023 an important milestone for the entire decade,” said José Manuel Salazar-Xirinachs, executive secretary of the Commission, at a virtual press conference from Chile on Monday.

The great benefactor of this investment was Brazil, the country that received 41% of the total inflows, followed by Mexico with 17%, Chile with 9%, Colombia with 8% and Argentina with 7%. Nearly half of these resources were from companies already operating in the countries. “This can be attributed to the fact that many companies probably withheld their profits in 2020 due to the effects of the coronavirus disease pandemic, and in 2021 and 2022 they directed those profits to the resumption of their activities”, indicates the report published by the ECLAC.

The second component, with 36% of the inflows, is “capital contributions”, which refer to money from new companies or those that enter countries for the first time. Finally, the third component is the loan between companies, also counted as FDI. Regarding the sectors, services concentrated the largest proportion of resources (54%), followed by manufacturing (30%) and natural resources. The report found that, despite the fact that developed countries are shifting from investing in hydrocarbon production to renewable energy sources, and therefore with lower carbon emissions, investment in hydrocarbons and the automotive sector exceeded that of energy clean.

“The non-renewable sector, although in the medium term it is going out in the world and in the region, this process will not be sudden due to the importance of both the reserves and the consumption of fossil fuels in the region and also because renewable energies are going to take time,” said Salazar-Xirinachs. For its part, the renewables sector is advancing rapidly and “is building more and more competitive capabilities that allow it not only to advance its own decarbonization process, but also the great potential of making a contribution to the decarbonization of the world,” added the executive secretary.

Regarding the countries of origin of the flows, the United States (USA) and the European Union (EU) remain the main investors in Latin America. The US increased its investments by 46% compared to 2021, while EU resources grew by 20%.

“In the future perspectives, evaluated from 2022, there is an improvement, according to the investment announcements” that are concentrated in large non-renewable energy projects, Salazar-Xirinachs assured. Last year, “for the first time since 2010, ads in coal oil and gas were the sector with the highest participation in the region,” she reported.

The energy transition, the effort that governments of developed countries promote to stop extracting fossil fuels to migrate to energies such as solar and wind, represents an opportunity for Latin America to contribute to productive development, Salazar-Xirinachs emphasized. “This involves the need for coordination and alignment between traditional energy policies and new productive development policies,” said the ECLAC official. “There are incentives that promote direct foreign investment in energy, but it is important to have a whole series of complementary policies in terms of productive development, science, technology, and human entrepreneurship.”

In conclusion, Salazar-Xirinachs said that for these types of resources to have an equitable impact on the territories, and not concentrate in the cities, “this cannot be forced, it cannot be decreed. The conditions must be created in each territory to attract high-quality investment”.

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