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Foreign Direct Investments in Latin America up 56% in 2010

We were expecting strong numbers for 2010 but maybe not that strong. ECLAC (United Nations) have finally released the numbers for foreign direct investments in Latin America and the Caribbean for 2010. After a clear slowdown in 2009 as the direct result of the world crisis the amount of investments are comparable to 2007 but not yet reaching the record level of 2008.

With not much surprise Brazil and Mexico are leading the pack with Brazil achieving its record ever with US$ 48,4 bn and Mexico at US$ 17,7 bn. Brazil has been fuelled with massive FDIs touching virtually every sector of the economy. Strong successive measures have been taken by the Brazilian government since the beginning of 2011 to slow down this huge US$ inflow pushing the Real to record levels and putting the country at risk of an economic overheat.

Chile and Peru also had an astonishing year with inflows of respectively US$ 15 and 7,3 bn. It is fascinating to see that Chile with quasi seven times less the population and GDP of Mexico managed to attract such an amount of FDI bearing in mind as well that the country suffered a terrible earthquake. Colombia registered a small decline in FDI but should see this number growing in the coming year given its return to investment grade rating in early 2011.

Argentina despite its still difficult investment environment and erratic economical decisions has continued to attract investors mostly from China and is back to its 2007 level at US$ 6,2 bn.

Smaller Uruguay is also having a good year and for sure the best ratio of FDI per inhabitant after Chile. US$ 1,6 bio for a population of 3,5 million....

Venezuela continues to show negative numbers for the second year in a row given the on going nationalization process in the country.

In Central America the growth is also there with an increase in FDI of 16% year on year. Panama and Costa Rica are leading the pack attracting together nearly 65% of the region's FDI. With a drop in FDI of 18% in 2010 Caribbean countries are still struggling with a depressed tourism sector, by far the largest driver of investments in the region. Dominican Republic remains the first country by destination with US$ 1,6 bn of FDI.

Overall 2010 has been a great year for the region and we believe that 2011 should amplify those results especially in countries such as Peru, Colombia or Uruguay. Mexico should also see some upward trend given the on-going recovery of the US economy.

Florent Michel
Managing Partner
Latina Finance & Co
May 2011

Jeudi 26 Mai 2011

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