Foreign direct investment up in Caribbean and Latin America

A report issued last Thursday by the Economic Commission for Latin America and the Caribbean (ECLAC) in Santiago, Chile shows that the Caribbean and Latin America received US $153.448 billion from foreign direct investment (FDI) in 2011, which represents 10 per cent of the total global flows.

The report entitled “Foreign Direct Investment in Latin America and the Caribbean 2011” stated that this is about the largest amount of FDI received by the region to date.

The largest amount of FDI in the region flowed into the Dominican Republic, where the FDI increased in 2011 to US $2.37 billion from $1.89 billion in 2010.

St Kitts and Nevis recorded an increase in foreign direct investment from US$122 million to $142 million, and St Vincent & the Grenadines saw an increase from $103 million to $135 million.

Antigua & Barbuda, however, did not record the significant growth that the report reflects. In 2010, the foreign direct investment recorded for the country was US $101 million, whereas in 2011, the figure fell to $64 million.

St Lucia and Grenada also experienced declines in FDI similar to the results for Antigua & Barbuda.

The report also detailed that in 2011, 46 per cent of the net income deriving from FDI was due to profit re-investments, while the remaining percentage was due to capital contributions and loans among companies.

According to the ECLAC, this denotes the trust of transnational companies in the region and important business opportunities within it. As shown in the report, this tendency, which started in 2002, is a result of the amount of assets accumulated by transnational companies in the region and an increase in their profitability due to the good economic performance of the countries and to high international prices of exported raw materials.

ECLAC nevertheless identifies a current phenomenon that is increasingly relevant since 2004: the growing repatriation of profits by transnational corporations investing in the region, a fact that reminds that FDI is not a unidirectional flow.

Among the main investors in 2011 were the United States (18 percent), Spain (14 percent), the Latin American and Caribbean region itself (9 percent) and Japan (8 percent).

ECLAC estimates that in 2012, the FDI flows to Latin America and the Caribbean will maintain high levels. Nevertheless, the organisation warns that if the crisis in the Eurozone worsens, the flow of investments — especially those coming from Europe — could be reversed.

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