LatAm FDI Soared to $225B in 2022. Here's Where It Went
Brazil swallowed 42% of LatAm's $225B FDI, with Mexico soaring on nearshoring bets.
All this investment represents a massive influx of capital to Latin America—about $225B worth last year, in fact, according to the United Nations Economic Commission for Latin America & the Caribbean (ECLAC, or CEPAL in Spanish and Portuguese). Mind you, this is just incoming investments, not including the billions of dollars of investment stock – or existing assets – held in the region by foreign investors.
Naturally, Brazil is the largest destination for all of this investment, swallowing up roughly 42% of the total. Latin America’s giant is the preferred regional FDI destination for Latin America’s largest investor, the European Union, and the preferred destination worldwide in recent years for Chinese investors.
Mexico has also seen its FDI soar over the past year as US and multinational firms seeking to jump on the nearshoring train have poured in money as a safer alternative to China. Meanwhile, Chile, long a preferred FDI destination due to macroeconomic stability, attracts 10% of total incoming investment.
Also punching above their weight are smaller economies that have prioritized liberalizing their trade profiles and opening their markets to the world. This includes Uruguay, which receives a similar FDI proportion to Peru despite being a tenth in size, and the rapidly-growing Dominican Republic.
Now comes the part you surely expected. The relationship between FDI and development is contentious and nuanced; it’s broadly accepted that investment can bring needed capital and technical know-how to a region, but only if invested in the right sectors.
We obviously love to see European and Chinese and Japanese, and American firms taking note of Latin America’s potential and investing in the region. We just want those investments to pay dividends within the region, not just outside of it.