* International Business Student, Universidad EAFIT, Medellin, Colombia
As the world’s Foreign Direct Investment (FDI) flows have shifted in recent years from developed to developing economies due to economic downturns, in 2013 global investment inflows rose significantly and the signs of recovery are expected to continue in the upcoming years. Developing economies are attracting the largest share of investments and are also becoming more prominent in terms of capital outflows. In spite of the fact that in previous years a lot of the FDI growth was driven by South American Countries, in 2013 flows to this sub region declined.
According to the 2014 World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD), global FDI inflows increased by 9% in 2013 reaching a total of U$1,4 trillion with an expected steady increase for the next 3 years. These expectations are based on the signs of recovery of the world's 36 developed economies, which accounted for 61% of the total outflows but only 39 percent of the inflows of FDI.
On the other hand developing economies are maintaining a dominant share of the FDI inflows with 54% of the overall global investment. As stated in the report, this represents the equivalent to U$778 billion, with Asia being the major recipient. As positive economic news appear to be spreading in developed countries and as the weight of developing ones increases in the global economy, transnational corporations’ executives are more confident in readjusting their focus to answer the growing potential of emerging markets.
As for Latin America and the Caribbean the report shows an uneven growth in terms of FDI inflows. Overall investment in the region had an increased of 6% in 2013 in relation to 2012, however, the report reveals that Central America and the Caribbean had a positive increase but with a 6% decline in South America.
Decline of FDI into the mining sector was the major reason for investments to decrease, especially in Chile, Argentina, Peru and Brazil. Yet, investments in the primary sector presented an important increase as well as industries like automobiles, electronics and beverages. In contrast, FDI inflows into Colombia increased by 8%, mainly to investment in the electricity and banking industries through Mergers and Acquisitions (M&A).
In conclusion, the global investment trends presented in the 2014 World Investment Report shows a positive sign of economic recovery in the developed economies and an important increase of FDI flows to all major developing regions. As for Latin America and the Caribbean prospects are optimistic caused by new opportunities arising in oil and gas, and Transnational Corporations investment plans in manufacturing.
UNCTAD. (2013).World Investment Report 2103. Ginebra y Nueva York: Naciones Unidas.