The health and economic crisis will result in a reordering of foreign investment at the global level, and countries like Central America will have the opportunity to take advantage of their geographical position to attract fresh capital.
The outbreak of covid-19 worldwide will cause a drop in production in 2020, however, by 2021 and 2022 the forecasts of international organizations anticipate that economic activity could rebound, a rise that would be coupled with new investments in various markets and sectors.
Panama and Honduras were the only two Central American countries to report increases in foreign direct investment in 2018 over the previous year, with year-on-year changes of 36% and 3%, respectively.
The growth of investments directed to Panama, which concentrated 51% of the sub-regional total, explained the increase that was reached in 2018 in Central America (9.4%), since except Panama and Honduras, the Central American countries received less Foreign Direct Investment (FDI) than in 2017, explains the report "Foreign Direct Investment in Latin America and the Caribbean 2019", produced by the Economic Commission for Latin America and the Caribbean (ECLAC).
One of the decisions taken by Guatemalan businessmen with interests in Nicaragua is to suspend new investments until the situation in the country is normalized.
Due to the social and political situation that the country has been experiencing for more than three months, Guatemalan investors that operate companies in Nicaragua have been analyzing the situation closely, and are already taking measures to minimize the impact of the crisis on businesses. One of the decisions that some companies have taken is to reduce the cost of the operation to the lowest possible level, in order to maintain or reduce product inventories.
Bucking the historical trend, since 2013 the isthmus has taken off positively as an investment destination compared to other Latin American countries.
A study by the CABI highlights how in recent years the Central American region, including the Dominican Republic, has been "seen with new eyes" by the rest of the world, as demonstrated by a study on Gross Capital Formation and Imports of Capital Goods variables, in Latin American countries.
The problem with income tax exemptions is that they favor high-return projects that would probably have been made anyway.
From an IDB document entitled "The effectiveness of tax incentives: The case of export processing zones in Costa Rica, El Salvador and the Dominican Republic".
Introduction and Summary
Policies encouraging investment make use of a variety of instruments.
In 2013 El Salvador attracted $140 million in foreign direct investment, Nicaragua $849 million, Honduras $1.060 billion, Guatemala $1.308 billion, Costa Rica $2.682 billion, and Panama $4 billion.
The Central America countries in total attracted $10.039,4 billion in foreign direct investment (FDI) in 2013, of which 40% went to Panama and only 1.6% went to El Salvador.
The best evidence for the current dynamism in the Nicaraguan economy is the figure of close to $1 billion in foreign direct investment which was reached in 2011.
Nicaragua managed to attract $967.88 billion in foreign direct investment in 2011, 90% more than in 2010, which closed with $460 million in FDI. The figure for 2011 corresponds to 13.7% of GDP and 63% of total private investment, according to data from the investment promotion agency PRONicaragua.
In 2009, Foreign Direct Investment will drop 30% in Nicaragua, according to preliminary data.
The country received $600 worth of FDI in 2008 (60% more than in 2007), and expects to close 2009 with $450 million.
"Despite this year's results in foreign investment, Alvaro Baltodano, presidential investments delegate, is optimistic for 2010. He explains there are several strategic investments being studied, and the figures could be substantially larger than this year", reported Elnuevodiario.com.ni.
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).
¿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.
The fDi Countries of the Future ranking is calculated by gathering data on foreign direct investment for 31 countries of the Caribbean and Central America.
In good times, multilateral lending agencies do not have too many customers. In times of crisis, everyone needs them.
To continue to grow and not stagnate, Latin America needs foreign investment in an amount ranging from 5% to 6% of the GDP in the region. It is $200 billion, a figure too large for the current scope of these credit institutions.
Rodrigo Lara Serrano pointed out in his article published in Americaeconomia.com that "multilateral bankers are going through times of plenty. ‘Everyone is knocking on the door and asking for money,’ said a source who asked to remain anonymous. Normally entities must search for good projects. 'Now we choose the projects, although this is delicate: How do you compare things when everyone says that their needs are of vital importance?'"
Americans may wonder why taxpayer funds should be poured into a bucket as leaky as Latin America if the goal is curing underdevelopment.
The region needs secure contract and property rights. If local leaders won't defend those rights, programs like Mr. Obama's $2 billion "global education fund" won't amount to a hill of frijoles.
A lesson in this reality is now playing out in El Salvador, where a $77 million investment by Pacific Rim Mining Corp., in one of the poorest parts of the country, has been stalled by the government of President Tony Saca.