Foreign direct investment (FDI) in Argentina dropped 60 percent last year to US$4.5 billion due to the US$5.3 billion compensation paid to Repsol for the 2012 nationalization of YPF, according to a report of the United Nations Conference on Trade and Development (UNCTAD).
The negative trend was also seen worldwide as the global FDI inflows declined by eight percent to an estimated US$1.26 trillion due to “fragility of the global economy, policy uncertainties and geopolitical risks,” according to the report.
FDI flows to Latin America are estimated to have decreased by 19 percent (US$153 billion) after four years of consecutive increases, mainly due to a reduced investment in extractive industries because of the lower commodity prices. Most of the decline took place in Mexico, where inflows are estimated to have fallen 52 percent. Brazil’s FDI flows were down four percent, while Chile saw its figures increase almost four-fold.
Developing economies saw FDI figures in 2014 reach a new high of more than US$700 billion, four percent higher than 2013, with a global share of 56 percent. On the other hand, FDI flows to developed countries dropped by 14 percent to an estimated US$511 billion, significantly affected by a large divestment in the United States. Foreign direct investment to the European Union reached an estimated US$267 billion, which represents a 13 percent growth.
With inflows to China at an estimated US$128 billion, the country became the largest FDI recipient in the world in 2014. The United States fell to the 3rd largest host country, while among the top five FDI recipients in the world, four are developing economies (Brazil, China, Singapore and Hong Kong).
“Trends in global FDI flows are uncertain for 2015. The fragility of the world economy, with growth tempered by hesitant consumer demand, volatility in currency markets and geopolitical instability will act as a deterrent for investors,” the UN’s agency said. “The decline in commodity prices will also lower investments in the oil and gas and other commodity industries.”
The 60 percent drop in Argentina had already been anticipated by the Economic Commission for Latin America and the Caribbean (ECLAC) three months ago, which said Argentina received less foreign direct investment than any other country in the region in the first half of the year. In that period, the country registered a negative flow of US$55 million dollars — drastically down on the US$5.88 billion that it received in the same period of 2013.
Date: January 30, 2015