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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.

Thursday, August 15, 2019

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).

You may be interested in "Foreign Investment Determinants”

From the ECLAC report:

Costa Rica was the second country with the highest investment (22% of the subregion's total), which, although in the last three years failed to reach the peaks of the 2013-2015 period, maintained levels higher than those recorded in the decade of 2000, while also highlighted the medium-term growth of investments in El Salvador (despite the negative year-on-year variation), since between 2011 and 2016 had received an average of $319 million per year.

Since exceeding US$ 1 billion in 2004, foreign capital flows to Panama have shown an upward trend, with only four year-on-year falls (in 2007, 2009, 2012 and 2017). In 2018, they grew by 36.3% and totaled 6.578 billion dollars, which positioned the country as the fifth recipient of FDI from Latin America and the Caribbean.

A particularity observed in 2018 was the low weight of capital contributions (1% of the total), since most of the investments entered as reinvestment of profits (50%), which grew very slightly (4%). In this sense, similar to what was observed in Brazil or Mexico, inter-company loan inflows (which almost doubled) were the main factor behind growth.

The latest available sectorial figures are for 2017, showing the predominance of FDI in services, which reached 67% of the total, with the transport and telecommunications sector as the main receptor, followed by trade, hotels and restaurants, and thirdly financial services. There was also a growth in FDI in natural resources, which accounted for 30 per cent of income in that year.

Costa Rica has stood out as an attractive country for transnationals. In 2018, it received US$ 2.764 million in FDI, a figure slightly lower than in 2017 (-3.2%) but which enabled it to rank as the eighth receptor in Latin America and the Caribbean.

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More on this topic

Central America: Foreign Direct Investment Up 10%

September 2018

Partly explained by the regimes created to encourage investment in different sectors, countries in the region went from receiving $11 billion in 2016, to $12.1 billion last year.

According to a study by the Center for Economic Integration Studies, in 2017 inflows of Foreign Direct Investment (FDI) in the region reached a record figure of $12.083 billion, registering an increase of 9.8% compared to 2016. When analyzing the period from 2010 to 2017, it can be seen that the inflow of FDI has increased considerably, showing a growth rate of 7.9%.

Foreign Investment Figures in Central America

August 2017

In 2016 44% of foreign direct investment in the region was concentrated in Panama, and a fourth consecutive year of increases was recorded, with 16%, while Costa Rica received 27% and increased by only 1.1%.

From chapter I of the report "Flows of FDI in Latin America and the Caribbean", by the ECLAC:

More FDI for All of the Region in 2011

May 2012

Foreign Direct Investment in 2011, in millions: Panama - $2,790, Costa Rica - $2,104, Honduras - $1,014, Guatemala - $985, Nicaragua - $460, El Salvador - $386.

Notable for its importance to the respective economies, is the growth of the arrival of foreign direct investment in Nicaragua, which increased by $460 million compared to 2010.

Foreign Direct Investment in Central America

October 2011

In the first six months of 2011, Panama received $1,426 million, 17% more than in the first half of 2010. Costa Rica received $1.057 million (+45%), Honduras $486 million (+15%), Guatemala $485 million (+54%), El Salvador $376 million (+1404%), and Nicaragua $284 million (+30%).

A report by the Economic Commission for Latin America and the Caribbean (ECLAC), confirms the upward trend in foreign direct investment (FDI) which has been recorded since 2010, for all of Latin America and the Caribbean.

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