ASIAN CRISIS ADVANTAGEOUS FOR FOREIGN DIRECT INVESTMENT
IN LATIN AMERICA

- 30% of such investment went to Brazil, followed by 19% to Mexico and 10% to Argentina,
says new ECLAC report -

The severe financial crisis in Asia seems to have been favourable for foreign direct investment (FDI) in Latin America, says the 1998 Edition of ECLAC’s annual report on Foreign Investment in Latin America and the Caribbean. In recent years, the Asian countries have attracted most interest from international investors, but Latin America’s share of FDI has been increasing very rapidly. In 1997, 38% of world investment flows went to developing countries, mostly to these two regions.

Worldwide, FDI flows have grown at an accelerating pace, reaching US$400,000 million in 1997, as a result of the expansion of transnational companies. While these flows have been strongly concentrated in industrialized economies, the relative importance of developing countries has been increasing.

FDI Flows to Developing Countries, 1990-1997
(millions of dollars)

Between 1995 and 1997, FDI flows to Latin America and the Caribbean grew from US$33,006 million to US$65,199 million. This spectacular increase meant that 45% of the FDI received historically in the region by 1997 arrived during the previous seven years. Despite the Asian crisis, estimates for 1998 are that FDI inflows will be of the same order of magnitude as last year.

In 1997, FDI in the region was strongly concentrated in the member countries of the Latin American Integration Association (ALADI), principally Brazil and Mexico. The remaining 10% was shared between the countries of the Caribbean basin (4%) and the Caribbean financial centres (6%). Brazil received 30%, followed by Mexico and Argentina, with 19% and 10% respectively. Colombia, Chile and Venezuela were also significant recipients. The main form of FDI in the region, especially in the larger economies, was the transfer of assets, both public and private, to foreign investors.

This year, FDI in the ALADI countries should reach some US$58,110 million, practically equal to 1997. The trend since 1994 towards spectacular FDI growth would therefore appear to be stabilizing. As in the last two years, flows are concentrated in Brazil, which receives substantially more than Mexico, Chile, Colombia, Argentina or Venezuela, due to the interest shown by foreign investors in the country’s privatisation programme. An example is the sale of Sistemas Telebrás in July, which brought in US$12,620 million in FDI.

FDI Flows to the 11 ALADI Latin American Countries, 1990-1998
(millions of dollars)

Source: ECLAC, data base of the Unit on Investment and Corporate Strategies, Division of Production, Productivity and Management, based on IMF information and the balance of payments data of each country

a/ Annual averages
(e) estimations based on data to end-June

Back to summaries