Foreign direct investments to the Caribbean rebounds significantly

The United Nations Conference on Trade and Development, UNCTAD, says investment flows to the region reached US$134 billion last year, up from US$88 billion in 2020.

According to UNCTAD’s World Investment Report 2022, foreign direct investment, FDI, in Latin America and the Caribbean rebounded from the pandemic-induced slump, growing by 56 per cent and that FDI flows to the region had plunged by 45 per cent in 2020, the sharpest decline recorded in developing regions that year.

It said the rebound in 2021 was propelled by a record number of 317 greenfield projects announced in the information and communications technologies sector across the region, a 61 per cent jump compared with 2020.

“Growth was also strong in traditional target industries, such as car manufacturing, electricity, financial and insurance services, as well as extractive industries,” said James Zhan, director of UNCTAD’s investment and enterprise division.

The report states that while FDI flows rose in all three subregions in Latin America and the Caribbean, excluding financial centres, a few national economies suffered further declines due to the pandemic’s continued economic effects and, in some cases, political instability.

All major recipient countries saw FDI rise as investment began flowing back into mining and energy sectors, adding that FDI to the Caribbean increased by 39 per cent to US$3.8 billion.

“The rebound in FDI to Caribbean economies was mainly driven by growth in investment flows to the Dominican Republic, the subregion’s largest recipient of foreign investment,” it noted, adding that the country recorded a 21 per cent in FDI, to US$3.1 billion.

The report also noted that the Latin American and Caribbean region saw an overall increase of cross-border mergers and acquisitions.

While the number increased by 49 per cent to 244 deals, the total value of net sales, estimated at US$8 billion, was almost unchanged from the previous year. The services sector recorded the highest increase in net sales – 12 per cent to US$6.4 – primarily in the financial and energy supply industries, the report says.

Greenfield investments in the region increased by 16 per cent, with most commitments going to the car, information and communication, and extractive industries.

The value of announced international project finance deals doubled, exceeding pre-pandemic levels, pushed by large projects in transportation infrastructure, especially in Brazil, and in mining and renewable energy activities across the region.

CMC