Foreign Direct Investment (FDI) and Development

Governments must understand the investors do not risk their money in order to develop receiving countries. They risk it in order to obtain more money.

Monday, August 23, 2010

The phrase on the lips of every Latin American government at the moment is "encourage foreign investment", as if there were a direct relationship between the amount of FDI and a country's development.

But this is unproven and an article in Americaeconomía.com points out that unfortunately many investors in the region put their money in commodities, services to internal markets and low-medium technology manufacturing industries. As a result, they do not tend to stimulate sustained improvements in domestic productivity.

This is the conclusion of a thorough report published a few weeks ago by the Economic Commission for Latin America and the Caribbean, ECLAC (CEPAL in Spanish) which adds that, "two decades after FDI liberalization the region's production structure is still characterized by low output and limited knowledge sharing".

More on this topic

Foreign Investment in El Salvador Still Falling

December 2010

FDI fell from $ 1.508 million in 2007 to $ 72 million in 2010. Businessmen claim the cause is the lack of confidence and certainty in current government economic policy.

2007: $ 1508 million, 2008: $ 784 million 2009: $ 431 million, 2010: $ 72 million. There should be a special consideration with the 2007 FDI numbers since they were affected by exceptional events such as the sale of banks to multinational banking corporations.

FDI down in Central America and Caribbean

September 2009

The manufacturing sector as a whole saw a decline in FDI due to a sharp drop in flows to Central America and the Caribbean.

In Central America and the Caribbean (other than financial centres), the decline in FDI inflows was largely due to a 20% fall in flows to Mexico, which mainly resulted from a halving of inflows to the manufacturing sector (CNIE, 2009).

The Race to the Future

August 2009

¿Which are the most attractive countries for Foreign Direct Investment? In Central America and the Caribbean, Puerto Rico is ahead, followed by Costa Rica and Dominican Republic.

fDi Magazine presented the results of their first fDi Countries of the Future 2009/10 Award.

Costa Rica ranks seventh for foreign investment

May 2008

Costa Rica is number seven in ranking of the Latin American countries that attract most foreign investment, according to a report by the United Nations Economic Commission for Latin America and the Caribbean.

Last year, Costa Rica received US$1.889 billion in foreign investment. Only Brazil, Mexico, Chile, Colombia, Argentina and Peru did better.

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