The top 10 of fDi’s third biennial ranking of American cities is a wholly North American affair, with all entrants located in Canada or the US. Rebounding somewhat following a turbulent economic period, FDI projects into North America increased 4.55% between 2012 and 2014.
As has been the case in the past two rankings, New York City takes the top spot, further cementing its position as not just a regional FDI powerhouse, but a global one. Beyond New York, however, a shake-up seems to be occurring as to where investors are locating in the region.
San Francisco’s golden era
San Francisco, which has finished second in the overall ranking, has seen inward FDI projects increase by 150% between 2010 and 2014. A total of 307 foreign investments were made in the city during this period. Located close to the innovation hub of Silicon Valley, 58.5% of all of San Francisco’s inward FDI was in the software and IT sector.
Project numbers in the software publishing subsector, in particular, increased dramatically in San Francisco between 2012 and 2014, rising from 10 projects in 2012 and to 33 in 2014. Investors are encouraged by this cluster in the city, as well as its geographical proximity to a large US market.
Cédric Ravalec, chief executive of France-based Android app company Genymobile, which established an office in the city in 2014, says: “San Francisco is definitely the core of mobile development. The biggest players in the mobile industry are in the [area], as well as our main corporate users.”
San Francisco is an innovative place, where more than 26,000 patents were granted between 2003 and 2013, with 80% growth being recorded between 2010 and 2013. In addition to attracting a high number of FDI projects, the city is home to companies that are also investing further afield. San Francisco was the source of 432 outward FDI projects, almost 65% of which were in the software and IT sector. The city’s top three companies for global investment were cloud computing and social enterprise Salesforce, social media behemoth Twitter and online accommodation firm Airbnb.
Houston takes off
Located on the eastern coast of Texas, the US’s second most populous state, Houston, has risen up the ranking to third place. Placing second in the Business Friendliness category for major cities, Houston is home to 14 companies on the FT Global 500 list and boasts business start up times of less than six days. There were 48 expansion projects in Houston in the five years to December 2014, showing the city’s enduring credibility with investors.
The US ranks highly in the strength of investor protection, corruption perception and economic freedom indices, adding to Houston’s allure. An accessible city for investors, its local George Bush International airport provides global connections to 67 locations and it boasts seven ports connecting to shipping routes in the Gulf of Mexico – helping it rank third in the Connectivity category for major cities.
Small but mighty Sunnyvale
Sunnyvale was the only small city (with a population of about 148,000) to appear in fDi’s American Cities of the Future 2015/16 overall top 10, and is part of California’s Silicon Valley tech hub. The city is economically healthy, boasting a GDP per capita of nearly $92,000*, inflation of only 1.98% and a low unemployment rate of 4.6%.
Its headline industries – software and IT, communications and semiconductors – are typical of an innovative Silicon Valley economy, and more than 20,000 patents were registered per 100,000 people between 2003 and 2013 – the highest of any city in the study. Sunnyvale is the source of 93.8 FDI projects per 100,000 people, the majority of which are in the city’s headline industries.
Sunnyvale is home to global internet company Yahoo!, tech start-up Plug and Play, and computer storage and data management company NetApp. These three companies accounted for almost half of the city’s 139 outward FDI projects between 2010 and 2014.
Latin American winners
In the overall Latin American Cities of the Future 2015/16 ranking, São Paulo retained first place. The city is a major FDI hub, attracting more than 500 projects between 2010 and 2014 from companies such as UK-based communications conglomerate WPP, US-based aerospace company Boeing and Germany-based logistics company Deutsche Post.
Antofagasta, a port city in the north of Chile, has risen to ninth position in the overall Latin American ranking. The city has a high GDP per capita ($52,272*), the third highest level of all Latin American locations studied. It also has a rich mining history, particularly in copper and non-metallic minerals, and the majority of its inward FDI focuses on supporting these industries. Industrial machinery, equipment and tools; chemicals; and coal, oil and gas are the city’s three main sectors, and it also saw a 40% increase in the number of patents registered in the city between 2010 and 2013.
Heredia in central Costa Rica was the only small location to feature in the top 10 table for Latin America. Featured in the February/March edition of fDi Magazine as a small city FDI hotspot, Heredia attracts 9.2 inward FDI projects per 100,000 people, the third highest of all Latin American locations analysed. More than 35% of the city’s inward FDI was in the business services sector, followed by 21.43% in software and IT services.
Investors are attracted by the city’s Global Park free-trade zone, UltraPark LAG and Intel FTZ Park, which are just three of the nine free zones and industrial parks the city has to offer. A cost-effective option for investors, Heredia commands low average salaries and rents, and likewise cheap electricity, as well as low costs for the importing and exporting of goods. These factors contributed towards its seventh place ranking in the Cost Effectiveness category for small cities.
While FDI in North America increased between 2012 and 2014, Latin America witnessed a decrease of 9.79% during the same period. Battling unstable economies, as well as civil and political unrest, Latin America’s woes are denting investor confidence. With a high dependency on oil in the region, the plunging prices witnessed in 2014 and 2015 are causing economic uncertainties in many Latin American countries.
The effect of these falling prices, however, will not just be felt in Latin America – cities in Canada’s Alberta, for example, are already feeling the pinch, and the somewhat fledging shale oil industry in the US needs a per barrel price of $60 to break even, a figure not yet seen in 2015. The fluctuation in the prices of commodities and energy can hold economies to ransom and the effects on regional FDI remain to be seen. With presidential elections scheduled before 2017 for nearly half of the countries analysed, FDI policies to encourage growth will become increasingly important in locations where domestic energy production is failing.
Note: * – international dollars
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