Chile has become the second receiver of foreign direct investment in Latin America

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The region of Latin America and the Caribbean received in 2012 a new record amount of foreign direct investment (FDI) of US$ 173.361 million (6.7% more than in 2011), despite the external context of sharp reduction of these global flows, reported today the Economic Commission for Latin America and the Caribbean (ECLAC) of the United Nations.

These figures are explained by the sustained economic growth of the region, the high prices of raw materials and the high profitability of investments associated with the exploitation of natural resources, the report says foreign direct investment in Latin America and the Caribbean, 2012 presented at the headquarters of the Agency in Santiago.

Brazil continues to be the main recipient of FDI, despite the slight decrease of 2 per cent in 2012, when he received $65.272 million, 41% of regional flows. In 2012 the most important increases were concentrated in Peru (which received $12,240 million) and Chile ($30.323 million).

Thus Chile beat Mexico and became the second most important destination of FDI.

Other countries that showed increases from 2011 were Argentina (27%), Paraguay (27%), Bolivia (23%), Colombia (18%) and Uruguay (8%). In Central America, highlights the results of El Salvador (34%), Guatemala (18%), Costa Rica (5%), Honduras (4%) and Panama (10%), which is still the main recipient of this subregion.

This year, the ECLAC projected entries of FDI to the region will be located in a range between a fall of 3% and a 7% increase.

“The results obtained in the field of foreign direct investment realize the good time that flows through the economy of Latin America. However, do not see very clear evidence of a significant contribution of FDI to the generation of new sectors or the creation of activities with high technological content, whereas one of the main challenges facing the region is a change in its productive structure,”said the Executive Secretary of ECLAC, Alicia Bárcena.

According to the report, FDI is directing more and more towards the exploitation of natural resources, particularly in South America. The weight of the manufacturing is quite limited in FDI inflows, with the exception of Brazil and Mexico.

The profits of transnational corporations operating in the region increased by 5.5 times in nine years, from US$ 20.425 million in 2002 to $113.067 billion in 2011. On average, transnational corporations repatriated to their parent houses a proportion of their profits slightly higher (55%) to reinvest in the countries where they were generated (45%).

These utilities so marked growth tends to neutralize the positive effect produced by the entry of foreign direct investment on the balance of payments, the Agency says. Between 2006 and 2011 income from FDI in the region have averaged $92.000 million per year, 92% of the value of the inputs of foreign direct investment in the same period.

United States and the countries of the European Union continue being the main investors in Latin America and the Caribbean, also highlighting Canada and Japan. However, in 2012 it grew significantly the proportion of FDI from the countries of the region (14% of the total). A high percentage of received investment can not be ascribed to any economy by the increasingly common practice of TNCs to channel their investments abroad through subsidiaries in third countries.