Durrant Pate/Contributor

The United Nations Conference on Trade and Development (UNCTAD) just released World Investment Report 2023 shows that foreign direct investment (FDI) flows to Latin America and the Caribbean rose by 51 per cent to US$208 billion in 2022, sustained by higher demand for commodities and critical minerals.

The report published today (July 5) highlighted South America, where flows to Brazil rose by 70 per cent to US$86 billion – the second-highest level ever recorded – due to a doubling of reinvested earnings. The number of international project finance deals rose by 29 per cent to 138, ranking the country fifth worldwide.

FDI more than doubled to US$15 billion in Argentina, doubled in Peru to US$12 billion and rose by 82 per cent in Colombia to US$17 billion. Flows to Mexico, the second-largest recipient in Latin America, increased by 12 per cent to US$35 billion with a rise in new equity investment and reinvested earnings.

Caribbean performance

The value of net cross-border mergers and acquisitions (M&As) jumped to US$8.2 billion (from less than $1 billion in 2021). In the Caribbean (excluding financial centres), FDI increased by 53 per cent to US$3.9 billion, mainly driven by growth in inflows to the Dominican Republic to US$4 billion.

Over the past five years, regional economic groupings attracted FDI flows in line with the overall trend in Latin America and the Caribbean. Flows rose to member states in the Asociación Latinoamericana de Integración (up 34 per cent to US$195 billion), the Mercado Común del Sur (up 35 per cent to US$105 billion) and to member states in the Caribbean Community (doubled to US$6.5 billion).

FDI fell by 11 per cent to member states of the Sistema de la Integración Centroamericana to US$13 billion. In 2022, the share of intraregional Greenfield project announcements remained relatively small at 11 per cent of all projects in the region (eight per cent in terms of value), but still higher than in 2017, when it was eight per cent of the total (six per cent in value).

Latin American and Caribbean multinational enterprises (MNEs) had 62 per cent of the value of their Greenfield projects in the region.

Sales by industries

Cross-border mergers and acquisitions (M&A) activity increased by 80 per cent to $15 billion. The manufacturing sector recorded the highest increase in net sales, particularly in food, beverages and tobacco, chemicals, paper and paper products.

However, the services sector remained the largest sector with net sales worth US$9.6 billion, mainly in information and communication. The value of announced Greenfield investment increased by 57 per cent with most commitments going to the extractive and automotive industries.

The number of announced international project finance deals fell by 18 per cent with declines mostly in mining, transport infrastructure, oil and gas. The United States, Spain and the Netherlands remained the largest investors in the region in 2021.