By: Staff Writer
December 6, 2022
The Economic Commission for Latin America and the Caribbean (ECLAC) in its latest Foreign Direct Investment Report for Latin America and the Caribbean (LAC) said that Costa Rica is ranked as Central America’s “top recipient” for foreign direct investment (FDI) while the now oil rich Guyana ranks as top Caribbean nation for FDI in 2021.
The ECLAC report said: “In Central America, Costa Rica ranked as the subregion’s top recipient for the second year in a row, while in Guatemala a large telecommunications acquisition accounted for the substantial increase, and Panama managed to recover after a major hit to investment in 2020. In the Caribbean, Guyana was the country with the highest growth, and this took it past the Dominican Republic, which in previous years had been the leading recipient of investment in the subregion.”
For Central America, while Costa Rica ranked first for a second year in a row, in Guatemala a large telecommunications acquisition accounted for the substantial increase, and Panama managed to recover after a major hit to investment in 2020.
The report added: “After a large drop in the first year of the pandemic, investment inflows to Central American countries recovered in 2021. Overall, the region received five times the inflows of 2020, totalling US$ 10.794bn and representing 7.6 percent of total inflows to Latin America and the Caribbean. FDI increased across all countries, with the top three recipients being Costa Rica (33 percent of the subregional total), Guatemala (32 percent) and Panama (13 percent), accounting between them for 87 percent of the year-on-year increase.”
It continued, “FDI inflows to Costa Rica totalled US$ 3.563bn in 2021, a 69 percent increase over 2020 and above the average received over the last decade. This increase was observed across all FDI components. Much as in previous years, reinvested earnings were the largest component (53 percent of the total), with 69 percent more inflows received than in 2020, while 25 percent of inflows were of equity, this being the component that grew most (95 percent).”
As regards prospects, Costa Rica was among the countries reporting an increase in new project announcements in 2021, with a record 142 announcements worth an estimated US$ 1.8bn, 12 percent more than in 2020, maintaining the upward trend of the last five years. New investment announcements in technology-intensive industries explain this dynamism, with projects in medical devices industries and in information and communications technologies at the forefront.
In the Caribbean, Guyana surpassed the Dominican Republic for the first time this year. The report said: “FDI inflows into the Caribbean in 2021 totalled US$ 8.957bn, a 19.4 percent increase on 2020, accounted for mainly by capital inflows in Guyana’s hydrocarbon sector and increased FDI in the Dominican Republic. Guyana has positioned itself for the first time as the leading FDI destination in the subregion, accounting for 50 percent of inflows, followed by the Dominican Republic (35 percent). The tourism-driven economies of the Caribbean were hit hard by the COVID-19 crisis, but foreign investment levels there are now 24 percent higher than in 2019. While investment in the tourism and hotel sector has started to pick up in the Dominican Republic, other countries such as Jamaica and Barbados have shown their potential in business process outsourcing, attracting investment from companies in the sector.”
“Guyana, which has been showing exponential growth in FDI inflows since 2018, consolidated its position as the leading recipient of inward investment in the Caribbean in 2021, reporting an inflow of US$ 4.453bn (116 percent more than in 2020). According to the Bank of Guyana (2022), this growth was mainly due to the hydrocarbon sector and the oil exploration project in the Liza field. The sector is expected to continue to attract FDI in the coming years. One of the main players in oil production in the country, ExxonMobil of the United States, announced that it planned a US$ 10bn increase in its oil investment in the Stabroek Block off the Guyanese coast, which is to include 6 drilling centres and 26 production wells.”
The report also said overall: “Services was the sector with the second highest growth (39 percent) and this increase was observed in almost all the countries analysed…..
“The manufacture of auto parts, iron and steel products and household appliances were the sectors that accounted for the dynamism of the country (Mexico), and Costa Rica and Colombia, in that order, ranked next among the countries with the most investment in the sector. Natural resource investments were 62 percent higher than in 2020, which is mainly explained by an increase in inflows to Guyana, Mexico, Chile, Colombia and the Dominican Republic.”
The report also pointed to the need for the region to increase its technological capacity in order to facilitate more FDI: “There are two phenomena that must be addressed through targeted policies framed as part of an inclusive and sustainable development strategy if the countries of the region want to use FDI to support processes of structural change and capacity-building and to increase the technological sophistication of their production mix. The first of these is the decade-long decline in the manufacturing share of FDI inflows, from 40 percent in 2010–2019 to 23 percent in 2021. While some countries have shown a certain resilience (e.g., Mexico, which remains a destination for FDI in large-scale manufacturing, albeit with investments fairly concentrated in the automotive and auto parts production chain, and Costa Rica, with a specialization in health-related industries), manufacturing FDI has been on the decline in most.”