São Paulo – The rebound in foreign direct investment (FDI) which began in 2010 has ended, and flows were down 18% in 2012 from 2011. So says the “World Investment Report – global value chains: investment and trade for development” released by the United Nations Conference on Trade and Development (Unctad) this Wednesday (26th). The study confirms Unctad’s previous forecasts, and reveals that in 2012, for the first time in history, developing countries received a larger FDI inflow than developed ones.
Last year, global FDI flows amounted to US$ 1.35 trillion. Of those, 52% went to emerging countries, 42% went to developed countries, and 6% went to “economies in transition” such as Russia. The forecast for 2013 is that global FDI should amount to US$ 1.45 trillion. Said flows are expected to increase to US$ 1.6 trillion in 2014 and US$ 1.8 trillion in 2015, but the Unctad warns: “Significant risks to this growth scenario remain.” The report ascribes this performance to a weak economy, and forecasts that recovery should take “longer than expected.”
The chairman of the Brazilian Society of Studies on Transnational Corporations and Economic Globalization (Sobeet), Luís Afonso Lima, imputed the decline in FDI seen in 2012 to the crisis, but also noted that emerging countries have gone from targets to investors.
“Europe is less and less of an investment target. Emerging countries, on the other hand, have not only begun seeing a larger inflow than developed ones, but they have also more than doubled their share as investors ever since the survey started being conducted (in 2000),” he said. Last year, emerging countries accounted for 35% of investment.
China climbed from the 6th position in the 2011 ranking of leading investors to the 3rd in 2012, topped only by the United States and Japan. Last year, outbound Chinese FDI stood at US$ 84 billion. Hong Kong invested another US$ 84 billion, and Russia invested US$ 51 billion. The Virgin Islands, Mexico, Singapore and Chile are other emerging countries which rank among the 20 leading global investors.
Brazil, however, was left out of the ranking of major global investor countries. According to the Sobeet’s assessment, Brazilian investment has not grown in the past four years, and last year they were down US$ 3 billion from 2011. According to Lima, that is due to the fact that domestic demand is strong, prompting Brazilian companies to invest locally rather than abroad.
“There are also internal and external hurdles. Internal hurdles include the lack of a policy to prevent double taxation (a Brazilian company which makes a profit abroad must pay tax on its earnings both abroad and in Brazil, and that detracts from its gains) and agreements to foster foreign investment. External hurdles include highly competitive international markets. But one must go abroad and face up to the competition,” said Lima.
Brazil was also the only country in South America targeted by a lower volume of FDI in 2012 than in 2011. The rate of decline was 2%. In 2012, the country saw an inbound US$ 65.3 billion, as against US$ 66.7 billion in 2011. Despite having been targeted by less FDI, the country outranked Belgium as an investment target, and now ranks 4th in the overall ranking, after the United States, China and Hong Kong. The ranking of leading FDI targets in 2012 is rounded out by the Virgin Islands, United Kingdom, Australia, Singapore, Russia and Canada.
In 2012, South America received US$ 144 billion worth of FDI. In Chile, FDI was up 30%; in Argentina, 27%; in Colombia, 18%; and in Peru, FDI was up 49% in 2012 from 2011. According to the study, FDI flows into South America increased because the middle class is growing a lot and fast, and because the region is rich in natural resources such as ores, oil and gas.
Arab differences
FDI inflows to Middle East countries were down for the fourth consecutive year. The region received US$ 47 billion, down 4% from 2011. The sharpest declines in FDI inflows were recorded in Saudi Arabia, which received US$ 12.2 billion, down 25% from 2011, and Turkey, where inbound FDI was down 23% to US$ 12.2 billion. These two countries were the targets of a combined 52% of total FDI into the region.
The amount of FDI to other Middle East countries grew. FDI into the United Arab Emirates was up 25% to US$ 9.6 billion. Kuwait received US$ 1.9 billion, more than twice the amount in 2011. FDI inflows to Bahrain, Oman and Qatar were also up.
Total FDI into Africa was up 5% in 2012 from 2011, to US$ 50 billion. FDI into North Africa was up 35% to US$ 11.2 billion in 2012. “. Much of the growth was due to a rise in investment in Egypt. Whereas the country experienced a net divestment of US$ 500 million in 2011, it attracted net investment inflows of US$ 2.8 billion in 2012,” according to the report.
*Translated by Gabriel Pomerancblum
