Foreign direct investment crucial to recovery, says ECLACFriday, October 15, 2021
Executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) Alicia Bárcena says foreign direct investment (FDI) is at the centre of the recovery plan for the Latin America and the Caribbean (LAC) region in the aftermath of the novel coronavirus pandemic, particularly to promote the creation of formal jobs and reactivate economic activity.
Speaking during a high-level seminar organised by Mexico's National Institute of Statistics and Geography (INEGI), Bárcena indicated that analyses carried out since 1995 show that FDI in most countries in the LAC region has not produced substantial changes in the productive structure.
“There is no evidence to suggest that FDI has contributed to a change of direction in the development model in the region because many inflows go the sectors where transnational enterprises have played a prominent role for decades,” she said.
According to her, in 2020 FDI inflows in the region fell by 34.7 per cent in the first half of the year, considering seven of the main recipient countries. While FDI inflows recovered from the decline of last year, the recovery is not sufficient to overcome the impacts of the contraction.
She said, too, that ECLAC has run different studies on the impacts of investments from specific countries, and has for instance identified that investments from the European Union have supported growth in strategic industries, such as the renewable energy sector, and investments from China have been concentrated in extractive industries and energy.
“The results achieved over the decade underscore the need to rethink the role of FDI in supporting sustained growth with greater social equality and environmental sustainability. The pandemic highlighted this need, given that FDI inflows are scarcer, and it is more important than ever that they support activities that enable long-term sustainable development,” she argued.
Consequently, she underscored the need for more initiatives like INEGI's in the LAC region.
“With better data we enable better analysis and therefore, better policy recommendations for countries, so they can attract FDI that supports their development objectives and control the investments that can be harmful to their long-run sustainable development,” she said.