The Main Wire | March 5, 2004
A report released Friday by the United Nations Conference on Trade and Development found that foreign direct investment (FDI) inflows to Brazil, Mexico and Columbia dipped in 2002 from 2001.
The agency said FDI flows to Brazil declined from $22.5 billion in 2001 to $16.6 billion in 2002, or by more than 26%.
However, the country remained the largest recipient of FDI in the region. Flows continued to be relatively strong despite possible contagion from the crisis in Argentina, Brazil's main trading partner in Mercosur, and despite uncertainty in 2002 over the outcome of that year's presidential elections.
Multinational companies (MNCs) from developed countries are still the largest investors in the Brazilian market, with the US accounting for a quarter of inflows over the 1990s.
Developing-country FDI remained relatively stable over the same period. FDI stock in the primary sector decreased greatly in 2002, while rising slightly in the secondary sector. FDI in the services sector fell from $1.6 billion in 2001 to $1.0 billion in 2002, as the large privatization programmes that had been concentrated in the sector came to an end.
After Brazil, Mexico is the second-largest recipient of FDI in Latin America and the Caribbean. Its FDI flows plunged 47% in 2002, down to $13.0 billion from $26.1 billion in 2001, the report said.
However, the exceptionally large inflows of 2001 were the result of US-based Citigroup's $12.5 billion acquisition of Banamex.
Although MNCs from developed countries account for the large FDI drop in 2002, they remain the principal investors in Mexico. Since the late 1990s the services sector (and financial services in particular) has become increasingly important for inward FDI, attracting the bulk of the country's flows.
FDI flows to Colombia also declined in 2002, falling from $2.5 billion to $2.0 billion, or by 18%.
This downturn is modest compared to other South American economies; UNCTAD attributed Colombia's relative good fortune to its favoured position within the Andean Community as an export platform for manufacturing MNCs.
MNCs from developing economies are largely responsible for the drop in inflows, compensated to some extent by increased investment from developed-country MNCs in 2002.
Accounting for 27% of inward FDI stock in 2000 -- the most recent year for which data are available -- as opposed to 71% in 1999, MNCs from the US were the largest foreign investors. FDI outflows, which are largely directed to other developing economies, rose sharply in 2002.The Main Wire:
