FDI IN LATIN AMERICA LAST 10 YEARS

LEIDY JOHANA ARCHILA PLATA

ABSTRACT

Foreign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. In the global economy, Latin American countries have attracted a significant amount of Foreign Direct Investment (FDI) in recent years. Investing in Latin America is now a central pillar of many international corporations’ and developed countries’ economic strategies. North American, Asian, and European firms have stakes in Latin America’s natural resources, telecommunications, and financial sectors.

FORMS OF FDI THAT HAVE BEEN IMPLEMENTED IN L.A

CATEGORIES AND EXAMPLES OF FDI IN L.A

JOIN VENTURE

PURCHASE OF EXISTING COMPANIES

DEVELOPMENT COMPANIES

FRANCHISES

REASONS TO INVEST IN L.A

Latin America is in an excellent position to lead the global economic recovery . The new expectations and opportunities for international investors have their focus on Spanish-speaking countries of Americas. ¨  POLITICAL STABILITY ¨  ECONOMIC GROW ¨  GLOBAL SCENARIO ¨  MULTICULTURALISM

FASTEST GROWING SECTORS THAT HAVE OCURRED IN LATIN AMERICA IN THE LAST 10 YEARS

REVENUE FROM FDI IN LATIN AMERICA AND CARIBBEAN

¨  Over the past decade , the two main factors contributing to the increase in FDI were:

•  Economic growth of the region. •  The high international demand for commodities. ¨  GDP growth in the region was reduced to 2.5% in

2013, the lowest level since the financial crisis felt in 2009.

¨  A key factor for FDI in seeking markets , grew by 3.4 % and in the context of an uncertain recovery in developed economies , TNCs continue to find investment opportunities in the markets of Latin America and the Caribbean.

DISTRIBUTION OF FDI BY SECTORS

¨  In 2012, the sectoral distribution of FDI for the region as a whole was similar to the average for the past five years, were:

•  Services (the largest destination sector) with 44% of the total in 2012. (Brazil 48%)(Mexico 42%)

•  Manufacturing slid slightly but still accounts for 30% of the total. (Mexico 48%)(Brazil 38%)

•  The proportion going to sectors based on natural resources was the same in 2012 (26%) as during 2007-2011.

TOURIMS SECTOR IN FDI

¨  Over the decades, tourism has experienced continued growth and deepening ‎diversification to become one of the fastest growing economic sectors in the world. Is a potential means to generate:

•  Export earnings. •  Creating many job positions, particularly for young people and

women. •  Promoting economic diversification oriented to service. •  Helps to revive cultural activities. ¨  Today, the business volume of tourism equals or even surpasses that

of oil exports, ‎food products or automobiles. Tourism has become one of the major players in ‎international commerce, and represents at the same time one of the main income ‎sources for many developing countries.

EFFECTS OF FDI IN LATIN AMERICA

FDI AND JOB CREATION IN LATIN AMERICA

¨  Based on the direct jobs, the activities that create more jobs are:

¨  Trade and construction. Seven per each million dollars of investment. ¨  Manufacturing and services. Three per each million dollars of investment. ¨  Mining activities (including oil). One for every two million of investment.

TRANSNATIONAL CORPORATIONS AND FDI

¨  The main agents of FDI are the TNCs through border mergers and acquisitions.

These types of investment have come to constitute 88% of total FDI. ¨  Motivations for these corporations: ¨  Obtaining natural resources ¨  Low labor cost ¨  Access to larger markets or growing markets.

INTERNATIONAL RELATIONS OF LATIN AMERICA IN THE WORLD

¨  Latin America has three strategies to entering in the world. 1.  Openness to the world: It consist in the articulation of

relations with different countries that involves the opening of economies to global markets and investment.

2.  Regional integration: Firts the regional integration leads to greater integration into the global economy, second the regional integration aims to strengthen the independence from the global economy.

3.  External fragmentation by regionalization and regional transmission links: Latin America try to defend their national interests, an strategy is to establish trade links with other regions of the world, as Europe and Asia.

CONCLUSION

¨  LATIN AMERICA HAS TO: Ø  Investment in sectors with high technological content

has a greater possibility of generating positive impacts in the local economy, but it is equally important for transnational businesses to establish links and productive chains with local companies.

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