Thursday, June 16, 2016

Bad FDI News in Latin America

The UN Economic Commission for Latin America and the Caribbean reports that foreign direct investment into Latin America dropped 9.1% in 2015. If you read a little deeper, then you see that the aggregate number tells only part of the story. Brazil really drags that number down.

For all the talk of violence in Mexico and Central America, FDI is up there (up 18% in Mexico) in large part because these are not based solely on primary products, prices for which are down. And for all the talk of loss of U.S. influence, the U.S. is by far the biggest source of FDI in the region.

But overall this is bad news. FDI is up globally but down in Latin America, with 2016 showing no signs of improvement, especially given the combination of recession and political crisis in Brazil.

What we also know, of course, is that Latin America continues to do a poor job of weaning itself off of primary products in general. Beyond Brazil, dependence on commodities leads to these boom and bust problems.


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