Caribbean economies remain attractive despite marginal decline in FDI

Posted by Investt

World Investment Report reports on Caribbean economiesFor the first time, developing economies claimed the lion’s share of global FDI in 2012. And despite a 2 percent decline in Latin America and the Caribbean, where total inflows stabilised at US$244 billion, the subregion remains an attractive investment destination. 

According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2013, developing nations led the world in foreign investment last year, accounting for 52 percent of global FDI inflows against a backdrop of global FDI declines of 18 percent.

Subtitled Global Value Chains: Investment for Trade and Development, the report singled out 29 small island developing states (SIDS), where FDI inflows increased 10 percent last year to US$6.2 billion.

Trinidad and Tobago accounted for 41 percent of that increase, due to reinvested energy earnings. After energy inflows declined due to depressed oil and gas prices,  the Trinidad and Tobago government revised its fiscal regime and started promoting more upstream and downstream activity, which attracted 38 percent FDI growth.

Papua New Guinea was the other small island state that helped boost overall FDI to SIDS for 2012 through exports of precious minerals and hydrocarbons.

Trinidad and Tobago and the Bahamas attracted US$2.54 billion and US$1.3 billion respectively in FDI in 2012.

The primary sector for SIDS investment was resources: petroleum, mining and quarrying.

Manufacturing came in a strong second, with metals and metal industries leading the way, followed by services like transport, communications and utilities.

Jamaica, which posted US$362 million in total FDI, distinguished itself in ICT and nearshore growth; two transnational corporations are considering building call centres on the Montego Bay Free Zone.

The report said that resource-rich markets and strong service sectors also helped Latin American nations gain billions in FDI inflows in 2012; Brazil earned US$65 billion, Chile US$30 billion and Colombia US$16 billion. The British Virgin Islands (BVI) was the only Caribbean nation to get similar inflows; it earned just under US $65 billion.

But South American economies expanded steadily since 2009 to capture 18.1 percent of FDI world totals in 2012, despite  a negative 2 percent slowdown of its biggest economy, Brazil. However, Brazil’s manufacturing sector continues to grow.South America claimed US$144 billion in FDI in 2012; Colombia, Argentina, Chile and Peru received most of foreign investment after Brazil, the report said. Natural resources account for most of the FDI, but investment into manufacturing and services, like Mexico’s nearshoring drive, is on the rise.

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