The United Nations Conference on Trade and Development (UNCTAD) released the World Investment Report 2021 on Monday (unctad.org/webflyer/world-investment-report-2021).
The information it contains shows the devastating effects of the Covid-19 pandemic on the world so far.
Foreign Direct Investment (FDI) is positive for the economy of a country because it allows it to get additional resources for its productive investments and, by investing in long-term projects, it is not apt to leave the country suddenly. Foreign direct investment generates more economic growth, more jobs, and more taxes for governments. And when it is well organized, it contributes to the development of technology and the reduction of poverty levels in the host country.
The UNCTAD report notes that due to the COVID-19 crisis in 2020, “global FDI flows have fallen by 35% to $1 trillion from $1.5 trillion in 2019. This is almost 20% lower than the 2009 minimum after the global financial crisis.” “.
Few countries have been rescued from suffering a decline in FDI amounts. Among the top 20 recipients of FDI, it only increased in these countries: China (6%), United Arab Emirates (11%), Hong Kong (61%), India (25%), Israel (32%), Luxembourg (313%) and Sweden (160%).
Despite these exceptions, the declines in FDI were significant in all regions:
Africa (-16%), Latin America and the Caribbean (-45%) Asia (-6%), Europe (-80%) and Southeast Asia (-25%).
FDI flows to economies in transition decreased by 58% and to Russia, the largest economy, by 69%.
Major Latin American economies have been hit hard by the pandemic and foreign direct investment has declined as follows:
Argentina (-38%), Brazil (-62%), Chile (-33%), Colombia (-46.3%) and Mexico (-15%).
In the United States, the world’s largest recipient of foreign direct investment, it fell from $261 billion to $156 billion, a decrease of 40%.
The other top 20 FDI destinations also did not perform well: Germany (-33%), Australia (-49%), Canada (-50%), France (-47%), Indonesia (-21%), Ireland ( – 59%), Japan (-33%), the United Kingdom (-56%), Singapore (-83%) and Vietnam (-2%).
According to the UNCTAD report, global FDI inflows are expected to fall to their lowest levels in 2021 and regain some of what they lost, with an increase of around 10-15%. This would leave FDI below the 2019 level by 25%. Current forecasts show a further increase in 2022 which, at the upper end of the forecast, will bring FDI back to the 2019 level. The outlook is highly uncertain and will depend, among other factors, the pace of economic recovery, the likelihood of pandemic setbacks, and the potential impact on foreign investment. direct recovery spending packages and political pressures.”
Will FDI inflows to Mexico increase dramatically if AMLO maintains its populist rhetoric, insists on favoring state-owned enterprises and criticizes the entrepreneurs’ middle and upper classes?
Investors, who have read The Economist, NYT, The Washington Post and El País, may feel more welcome by other countries’ governments.
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