Looking two decades forward at the future of economic development and foreign direct investment in the Americas, we should not be naive. There will be climate disasters, public health emergencies, economic crises, civil unrest and geopolitical confrontations to disrupt economies and business plans. Still I am an optimist: in addition to these episodic shocks, I’ve identified five major topical factors that will impact FDI decision-making, knowing also that these will manifest unevenly across countries in the Americas.
Firstly, demographic trends will include slower population growth and ageing workforces. Global migration will increase and immigration policy will be increasingly important as part of a broader economic strategy. Population diversity will be a growing reality and increasingly accepted and valued.
Secondly, workforce trends will be dominated by the impacts of Industry 4.0 technologies. Specific skill shortages and redefined occupations will demand more adaptive educational systems and massive on-the-job re-training, varying greatly by sector.
Thirdly, economic and fiscal challenges will be intertwined more than ever in the post-Covid-19 decades. Countries — their peoples and governments — will be challenged to simultaneously recover fiscal stability, redistribute incomes to support consumer power and social cohesion, while also facilitating investment and economic expansion.
Fourthly, environmental risks and their mitigation will continue to grow in importance to countries and cities. Climate change, water shortages, habitat destruction and species loss will increasingly influence policy and investment decisions, as will the infrastructure, energy and technology adaptations that follow. Sustainability will be more deeply implicated in cross-border trade and investment decisions.
Finally, government policy-making will be hugely tested. Philosophical and policy battles are already being waged between free market capitalist economies and more centralised, technocratic, managed economies. This goes beyond “industrial policy strategy” to include broader issues of democracy, political and economic freedoms. Trump-inspired populism and nationalism will be reoriented under Joe Biden’s domestic and foreign policies, prompting reconsideration in other countries. China’s influence in the region through state-led investment, debt financing of infrastructure and other policies will be a constant underlying consideration for public and private actors.
Overall, business location strategy will become more challenging and more important. FDI trends favour more regionalised strategies in response to global supply chain and investment risks, more restrictive government FDI policies, new digital business models and more. The future is guaranteed to be more urban, but choosing the optimal metropolitan destinations for new corporate investment will at least need to consider these five broad issues.
Gregg Wassmansdorf is senior managing director, consulting, at Newmark, a global commercial real estate services firm, and is also a member of the Site Selectors Guild. E-mail: firstname.lastname@example.org
This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.