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Foreign Investment in Latin America and the Caribbean: 1997 Report. Press Conference, 4 May 1998 Investment and Corporate Strategies Unit, Division of Production, Productivity and Management, ECLAC- United Nations. Presentation of the 1997 Report.

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Foreign investment in latin america and the caribbean 1997 report l.jpg

Foreign Investment in Latin America and the Caribbean: 1997 Report

Press Conference,

4 May 1998

Investment and Corporate Strategies Unit, Division of Production, Productivity and Management,

ECLAC- United Nations


Presentation of the 1997 report l.jpg
Presentation of the 1997 Report Report

1. Foreign Direct Investment (FDI) Trends in Latin America and the Caribbean

2. The new orientation of the ECLAC’s Unit on Investment and Corporate Strategies

3. The case of Argentina

Unit on Investment and Corporate Strategies, ECLAC


1 the 1997 report fdi trends in latin america and the caribbean l.jpg
1. The 1997 Report: ReportFDI Trends in Latin America and the Caribbean

  • Global FDI flows and the situation of Latin America and the Caribbean

  • FDI modalities in Latin America and the Caribbean

  • FDI sources and its sectoral distribution

  • Principal investors: countries and companies

  • Perspectives

Unit on Investment and Corporate Strategies, ECLAC


A global fdi flows and the situation of latin america and the caribbean l.jpg
a) Global FDI flows and the situation of Latin America and the Caribbean

  • Rapid growth reaching more than $350 billions in 1996

  • increased share for developing countries: from 15 to 38 % between 1990 and 1996

  • of which: Asia gets 60% and Latin America gets 30%

  • FDI inflow to China alone = FDI inflow to all of Latin America and the Caribbean

  • new situation in Latin America favors its incorporation in the corporate strategies of TNCs.

Unit on Investment and Corporate Strategies, ECLAC


Total fdi flows 1990 1996 millions of dollars l.jpg
Total FDI flows, 1990-1996 the Caribbean(millions of dollars)

Unit on Investment and Corporate Strategies, ECLAC


Fdi flows to developing regions 1990 1996 millions of dollars l.jpg
FDI flows to developing regions, 1990-1996 the Caribbean(millions of dollars)

Unit on Investment and Corporate Strategies, ECLAC


B fdi modalities in latin america and the caribbean l.jpg
b) FDI modalities in Latin America and the Caribbean the Caribbean

  • 1990-1993: acquisitions, especially of state assets

  • 1994-1996: more emphasis on FDI in new assets

    • restructuring and modernization of existing TNC operations

    • restructuring and modernization of privatized companies

    • new entrants making green field investments

  • acquisitions: more emphasis on private rather than state assets

  • lately: new wave of FDI in privatizations (Brazil, Colombia) and concessions for exploration, infrastructure, etc. (Mexico, Argentina, Venezuela)

  • high demand for local assets produces price rises, meaning that more FDI is needed for same quantity of assets

Unit on Investment and Corporate Strategies, ECLAC


Fdi inflows by modality laia countries 1990 1996 an approximation millions of dollars l.jpg
FDI inflows, by modality, LAIA countries, 1990-1996: the Caribbeanan approximation(millions of dollars)

Unit on Investment and Corporate Strategies, ECLAC


C recipient countries and sectoral distribution of fdi 1990 1996 l.jpg
c) Recipient countries and sectoral distribution of FDI, 1990-1996

  • Mexico, Brazil y Argentina receive 2/3 of FDI inflows to 11 Latin American Integration Association (LAIA) countries

  • 1990-1995: Mexico = 38%

    • factors: NAFTA, 1994 devaluation, sale of private assets

    • focal points of FDI attraction: manufacturing (automotive, electronics, apparel), commerce, financial sector

  • 1996: Brazil = 30%

    • factors: economic stabilization, sale of state assets, Mercosur

    • focal points of FDI attraction: manufacturing (automotive), electrical energy

  • others: Argentina (automotive, food products, energy and telecom), Chile (mining, services), Colombia (petroleum, financial services)

Unit on Investment and Corporate Strategies, ECLAC


Laia principal country recipients of fdi 1990 1996 l.jpg
LAIA: principal country recipients of FDI, 1990-1996 1990-1996

Unit on Investment and Corporate Strategies, ECLAC


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FDI attraction factors in Latin America and the Caribbean 1990-1996

  • Manufacturing: diverse corporate strategies

    • in Mercosur: more to defend existing market shares in context of opening up of economies (automotive, chemicals)

    • Mexico: more to improve export market shares in NAFTA thru improved efficiency (automotive, electronics, apparel)

    • Caribbean Basin: increase exports to US market thru improved efficiency and use of incentives (apparel)

  • Services: access to recently liberalized sectors

    • telecom: Argentina, Brazil, Chile, Peru

    • electrical energy: Argentina, Brazil, Colombia, Peru

    • financial services: Argentina, Mexico, Chile, Colombia

  • Primary sector: raw materials which had restricted access

    • petroleum: Colombia, Venezuela

    • mining: Argentina, Chile, Peru

Unit on Investment and Corporate Strategies, ECLAC


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Latin America: principal focal points of FDI attraction 1990-1996

Unit on Investment and Corporate Strategies, ECLAC


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The principal investors in the region 1990-1996

  • USA: biggest single country investor in the region

    • manufacturing mainly in Mexico, also in Mercosur

    • in-bond assembly operations in the Caribbean Basin

  • Europe: growing presence

    • most important investors: Spain, Germany and United Kingdom

    • mainly in services and manufacturing in Mercosur

  • Japan: essentially absent from the region

  • Latin American investors: incipient investors

    • Chilean investors in electrical energy in Mercosur

    • Mexico investors in cement and food in several countries

    • interaction of Colombia-Venezuela

  • 20 biggest foreign enterprises = 44% total sales of 161 principal

    TNC operations in the region

    • main activities: automotive, petroleum, food products, telecom

    • USA (9), Europe (10), Japan (1)

Unit on Investment and Corporate Strategies, ECLAC


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The 20 biggest foreign enterprises in Latin America, by sales, 1996

Unit on Investment and Corporate Strategies, ECLAC


Perspectives l.jpg
Perspectives sales, 1996

  • New record for FDI in region in 1997: more than $50 billions

  • Latin America improves relative position

    • consolidation of FDI attraction factors

    • Asian crisis does not produce major effect on FDI inflows

  • principal focal point continues to be Brazil

  • increase in acquisitions, especially state assets in Brazil

  • strong FDI in automotive industry in Mexico and Mercosur, natural resources (petroleum in Venezuela and mining in Argentina) and services (Brazil and Colombia)

  • new investors: Spain in banking and Chile in electrical energy

Unit on Investment and Corporate Strategies, ECLAC


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2. The new orientation of the ECLAC’s Unit on Investment and Corporate Strategies

  • Problem: shortcomings of the official data

    • Requires sources of complementary information

    • A conceptual model for guiding research

  • Its application to Latin America and the Caribbean

Unit on Investment and Corporate Strategies, ECLAC


A shortcomings of the official data l.jpg
a) Shortcomings of the official data and Corporate Strategies

  • IMF:FDI flows according to modality (capital, reinvestment, intra- company debt);

    • advantage: permits greater international comparability

    • problem: lack of geographic or sectoral information

  • OECD: FDI flows according to source and destination;

    • advantage: investor countries’ perspective

    • problem: severe distortion due to financial centres

    • problem: differing definitions and accounting practices (example: definition of % shareholding that constitutes company control)

  • National sources:FDI flows according to source and destination;

    • advantage: recipient country’s perspective

    • problem: severe distortion due to financial centres

    • problem: differing national accounting practices (numerous)

  • Unit on Investment and Corporate Strategies, ECLAC


    Comparision of offical data from three different sources imf oecd and national sources l.jpg
    Comparision of offical data from three different sources: and Corporate Strategies IMF, OECD and National sources

    • Methodological convergence is incomplete

    • Need to complement existing official information

    Unit on Investment and Corporate Strategies, ECLAC


    B sources of complementary information l.jpg
    b) and Corporate StrategiesSources of complementary information

    • News media: economic and financial press

    • Information from business organizations and individual companies

    • Information and analysis from academic institutions

    • Reports of the research program of the Unit on I&CS (especially the questionnaires administrated to companies)

    Unit on Investment and Corporate Strategies, ECLAC


    Three groups of factors l.jpg

    c) A general conceptual framework: and Corporate Strategies

    Three groups of factors:

    2. NATIONAL POLICIES

    - general rules and norms

    - rules for specific industries

    - sistemic competitiveness of host country

    - policies on FDI, technology, intellectual property, quality, etc.

    3. CORPORATE STRATEGIES

    - how companies turn market

    tendencies and national

    policies to their advantage

    -search for: efficiency

    market access

    raw materials

    strategic elements

    - implementation of its international system of integrated production:

    investment

    technology

    raw materials

    supplier networks

    etc.

    1.INTER-

    NATIONAL

    MARKET

    FACTORS

    - market structure

    - nature of competitors

    - technological aspects

    - international rules and norms:

    trade, investment, technology, intellectual

    property, quality, etc.

    Unit on Investment and Corporate Strategies, ECLAC


    The conceptual framework applied to latin america and the caribbean l.jpg
    The conceptual framework applied to Latin America and the Caribbean

    Unit on Investment and Corporate Strategies, ECLAC


    D its application in the research program of the unit on i cs l.jpg
    d) Its application in the research program of the Unit on I&CS

    • Research reports pertaining to the box on “efficiency-seeking / manufacturing”:

      - Automotive industry in Mexico (2)

      - Apparel in the Caribbean Basin:

      Costa Rica & Dominican Republic (2)

      - In-bond assembly in Mexico:

      (color television receivers)

    Unit on Investment and Corporate Strategies, ECLAC


    Future research activites investment and corporate strategies in l.jpg
    Future research activites: investment and corporate strategies in...

    • the “raw materials-seeking / primary sector” box (petroleum/gas, and minerals)

    • the “market-seeking / manufactures” box (automotive, chemicals, food products, etc.)

    • the “market-seeking / services” box (finan-cial services, telecom, electrical energy, etc.)

    • Others

    Unit on Investment and Corporate Strategies, ECLAC


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