The latest report from the Economic Commission for Latin America and the Caribbean (ECLAC), part of the UN, says that the main driver behind this increase has been the internationalisation of a small group of Mexican and Brazilian transnational companies.
Last year, Brazilian mining group Companhia Vale do Rio Doce acquired Canadian nickel company Inco for $17bn, the largest foreign acquisition ever made by a Latin American company.
Other Brazilian companies, such as Petrobras (oil), Gerdau (steel) and Itau (banking) all made major purchases in a diverse range of foreign assets last year.
In the case of Mexican companies, America Movil (telecommunications) and Telmex (telecommunications) made big acquisitions in Latin American and the Caribbean, and Alfa (petrochemicals and telecommunications) expanded in the US, Europe and China. Cement producer Cementos Mexicanos (Cemex) acquired its Australian rival, Rinker, for $14bn.
Other major acquisitions by Latin American companies included the Argentine steel tubing producer Tenaris, which paid $3.18bn for its US competitor, Maverick Tube Corporation, and Venezuelan oil giant Petroleos de Venezuela SA, which invested in refineries in Argentina, Belize, Brazil and Uruguay, and gas pipelines in Colombia.
Michael Mortimore, chief of ECLAC’s unit on investment and corporate strategies, says: “These operations demonstrate that trans-Latin American companies have recently become much more active participants in internationalisation processes, especially outside the region.
“These companies are finding that they are constrained by their own markets. International competition is becoming much stronger, and they must have a position in global markets if they are to survive.”
According to ECLAC, in 2006 FDI inflows to Latin America and the Caribbean (excluding the main offshore centres) reached more than $72bn, an increase of 1.5% on 2005.
However, the region’s share of global FDI inflows has declined to 8% from a peak of 16% in 1997, as flows have increased more rapidly in other parts of the world (globally, FDI inflows rose by 34% last year).
Mr Mortimore adds: “The main message of this year’s report is that active and integrated FDI attraction policies linked to national development strategies are necessary to secure quality FDI.”