$153.5 billion came into the region last year mostly to tap into 'dynamic domestic markets'
Despite the troubled global economy and a surge in economic nationalism, foreign investment into Latin America jumped 27% to a record $153.5 billion last year, according to ccording to a report issued on May 4 from the Economic Commission for Latin America and the Caribbean.
Unsurprisingly, booming Brazil netted the lion's share for the region, including the Caribbean, with foreign direct investment (FDI) jumping 37.4% to $67 billion.
Investment into Chile and Mexico put on smaller gains, while Colombia, of the other major economies, scored a 92% jump in FDI to $13.2 billion, according to the report.
"The region's sustained economic growth... continued to attract investments seeking to tap into dynamic domestic markets," it said. "High international prices for raw materials spurred investments in natural resource extraction and processing."
In addition, it said, the region is benefiting from business restructuring and offshoring in crisis-hit developed economies.
"In spite of the prevailing uncertainty in global financial markets, Latin American and Caribbean economies attracted important amounts of foreign direct investment during 2011. These amounts should remain high in 2012," said Alicia Barcena, the executive secretary of ECLAC.
But the report noted that the region continues to get more low-technology investment -- particularly in mining and food production -- when economists say the region needs to upgrade into higher-value-added manufacturing.
Some 61% of investment projects were in low-tech sectors last year, compared to investment that goes into Asia, where 80% of projects are medium-to-high technology.
Strong investment into the region has challenged some governments' ability to keep inflation and currency volatility in check, with Brazil in particular complaining about the strength of its currency, the real. However, the trend could see some head winds in the rise of economic nationalism, with Bolivia, Argentina and Venezuela all recently involved in forcibly taking control of foreign investor assets. On May 1 Bolivian President Evo Morales nationalized a Spanish-owned power company, just weeks after Argentina sparked a controversy with by seizing control of a subsidiary of Spain's oil giant Repsol.
Meanwhile Venezuela, which has also in recent years grabbed control of foreign investor assets, in January announced it would pull out of the World Bank's private sector arbitration unit just weeks after ExxonMobil said it would pursue claims in the body against Caracas for nationalizing its assets.
But on May 4 International Monetary Fund spokesman Gerry Rice said he did not see the nationalization cases in Argentina and Bolivia as a trend. "It's a very diverse region, we would not call what we see a trend. The region as a whole has benefited from investment," he said. "What we've said in the past is (that) the importance of a predictable investment climate is key in all countries."
Copyright Agence France-Presse, 2012