São Paulo – The global flow of foreign direct investment (FDI) should exceed US$ 1.2 trllio0n this year, according to estimates culled from the World Investment Report , an annual publication issued last Thursday (22nd) by the United Nations Conference on Trade and Development (Unctad). The forecast points to a resumption of growth after consecutive declines in 2008 and 2009.
International FDI flow peaked in 2007, at US$ 2.1 trillion. In the two years that followed, however, the financial crisis halted the flow, and a modest bounce back took place only in the second half of 2010, according to the Unctad. In the assessment of the UN agency, the resumption process seems to be consolidating itself.
For 2011, the organization forecasts a turnover ranging from US$ 1.3 trillion to US$ 1.5 trillion. The estimate for 2012 ranges from US$ 1.6 trillion to US$ 2 trillion, a figure that still does not match the record-high of 2007. The report underscores, however, that these forecasts “are laden with risk and uncertainty, including the fragility of the global economic recovery.”
In the report, the Unctad points to a few changes in behaviour of global investment flows that should become increasingly perceptible. Among them is the continuing increase in importance of developing countries as sources and targets of FDI; the retraction of investment in the processing industry compared with the services and primary sectors; and the continued internationalization of production.
In this respect, the survey claims that although the United States have remained the leading FDI target in 2009, China ranked second, and out of the six largest targets, three are emerging countries or economies in transition (former members of the Soviet Bloc).
The Unctad also claims that multinational companies based in developing countries are more optimistic than those of developed nations, and expect a more rapid resumption of their investment. The report describes the BRICs (Brazil, Russia, India and China) as “stars” in FDI attraction. The report informs that investment flow should resume its growth mostly through mergers and acquisitions.
Middle East and Africa
In terms of regions, the report shows that investment in West Asia, which includes the Middle East, has dropped by 24% in 2009 and totalled US$ 68 billion. The reduction, which took place after six consecutive years of growth, was prompted by lack of credit in the international market, which in turn has affected mergers and acquisitions and development projects underway in the region.
The only countries into which FDI inflow increased last year, compared with the previous one, were Qatar and Lebanon. The former received US$ 9 billion, representing growth of 112% over 2009. The main attraction was the liquefied natural gas (LNG) sector, which is very strong in the country, and was less affected by the crisis than the oil industry.
In Lebanon, according to the Unctad, there was growth of 11% and the country ended the year with US$ 5 billion in FDI. According to the report, business was boosted by the real estate sector.
On the other hand, the most affected countries in the region were the United Arab Emirates, which suffered a domestic crisis with the moratorium of the Dubai World conglomerate, and Turkey. Even though it received less funds, Saudi Arabia remained the leading target of FDI in the Middle East.
The leading sources of FDI in 2009 were Kuwait and Saudi Arabia. The Emirates, which used to rank first, have dropped to the third position. The Unctad expects flows to recover this year.
In Africa, the FDI inflow dropped by 19% last year and totalled US$ 59 billion. According to the report, the decline was small when compared with other regions. The reduction was caused by reduced demand and lower prices of the commodities produced in the continent.
The services sector, led by telecommunications, was the top attracter of investment in Africa, and had the highest number of mergers and acquisitions. The country that received the most funds was Angola (US$ 13 billion), followed by Egypt (US$ 7 billion), Nigeria and South Africa (US$ 6 billion each), Sudan, Algeria and Libya (US$ 3 billion each) and Congo, Tunisia and Ghana (US$ 2 billion each).
To the Unctad, foreign capital inflow into the continent should recover gradually as world economy improves and commodities prices bounce back, which is expected.
Latin America
In Latin America and the Caribbean, foreign direct investment totalled US$ 117 billion last year, a 36% decline over the previous year. Even though Brazil received 42% less funds, it remained the leading FDI target in the region.
The Unctad informs, however, that the flow is improving this year, as the region’s economy is recovering at a “relatively fast pace.” In the first quarter of 2010, for instance, FDI inflow increased by 20% compared with the same period of 2009.
Brazil and Mexico should continue to be “popular investment targets,” according to a survey conducted by the Unctad among investors, and Brazil should also return to being a source of direct investment, which dropped sharply in 2009.
*Translated by Gabriel Pomerancblum
