Chile’s Foreign Direct Investment (FDI) has been on a positive trajectory in recent years, outperforming other Latin American countries. The United Nations Conference on Trade and Development (UNCTAD) report, published recently, reveals that FDI inflows in Chile in 2023 reached $21 billion, marking a robust 24.6% increase from 2022. This growth, significantly higher than other regional players, underscores Chile’s promising FDI landscape in 2023.

Regional Comparison of FDI Inflows

Argentina: $22.9 billion (growth of 48.7%)

In 2023, Argentina witnessed significant Foreign Direct Investment (FDI) inflows, predominantly in the energy, mining, and agriculture sectors. The energy sector, especially renewable energy projects, attracted considerable investment due to the country’s abundant natural resources and commitment to transitioning towards greener energy sources. Additionally, the mining sector, with its rich reserves of lithium and other critical minerals essential for the global shift towards electric vehicles and renewable energy technologies, saw substantial FDI. Agriculture also remained a significant recipient of foreign investment, driven by Argentina’s strong export-oriented agro-industrial base and global demand for its agricultural products. These sectors collectively contributed to drawing foreign capital to Argentina in 2023.

Brazil: $65.9 billion (decrease of 10.2%)

While Argentina’s FDI inflows showed a higher percentage growth, the absolute volume of FDI inflows in Chile in 2023 is a testament to its economic resilience, especially when compared to Brazil’s decrease. Despite the decline in Brazil’s FDI inflow, the country saw a significant influx of Foreign Direct Investment (FDI) in 2023, particularly in the manufacturing, technology, and renewable energy sectors. The manufacturing sector, leveraging Brazil’s large domestic market and its role as a regional production hub, attracted substantial investment. The technology sector also saw considerable FDI, driven by Brazil’s growing digital economy, expanding e-commerce market, and vibrant startup ecosystem. The renewable energy sector, supported by Brazil’s vast natural resources and favorable policies, also received notable foreign investment. These sectors collectively emerged as the key attractors of FDI in Brazil in 2023.

Outbound FDI Flow from Chile

Chile’s outbound FDI flow in 2023 was $5.6 billion, a significant drop of 53.0% compared to the previous year. In comparison:

Argentina: $2.4 billion (15.7% growth)

Brazil: $29.9 billion (decrease of 6.8%)

Despite this decrease, Chile’s outbound investment volume remains higher than Argentina’s, although significantly lower than Brazil’s.

The Stock of FDI Inflow in Chile

The stock of FDI inflows in Chile also shows robust performance. In 2023, the stock of incoming FDI in Chile was $267 billion, with a growth of 6.8% compared to 2022. In comparison:

Argentina: $129 billion (10.4% growth)

Brazil: $997.5 billion (13.6% growth)

Although the percentage growth in Argentina and Brazil was higher, the stock of FDI inflow in Chile remains remarkably high, highlighting the robust FDI inflows in Chile in 2023.

Cross-border Mergers and Acquisitions

Chile had a mixed performance regarding cross-border mergers and acquisitions. In 2023, net sales were $2.012 billion, a decrease of 13.8% from the previous year. In comparison:

Argentina: -$181 million (negative net sales)

Brazil: $8.5 billion (growth of 455.0%)

Greenfield Investment Projects

With an increase of 186.5% in 2023, Greenfield investment projects in Chile reached $22 billion. This growth is substantially higher than that of other countries in the region:

Argentina: $9.2 billion (25.4% growth)

Brazil: $36.2 billion (69.0% growth)

Regional Comparison

Chile has maintained a competitive position in receiving and issuing FDI in Latin America and the Caribbean. While the region has experienced fluctuations, FDI inflows in Chile have stood out with significant increases in several key FDI indicators, reflecting the impressive growth of FDI inflows in Chile in 2023.

The robust FDI inflows in Chile underscore the country’s economic resilience and attractiveness to foreign investors. Despite the impressive growth rates in Argentina and Brazil, Chile’s $21 billion FDI inflow in 2023 represents a notable 24.6% increase, highlighting its strong position within the region. Chile’s $267 billion stock of incoming FDI further supports this growth trajectory, indicating sustained investor confidence. The significant rise in Greenfield investment projects, which surged by 186.5% to $22 billion, underscores the country’s dynamic investment environment. Additionally, while Chile experienced a 13.8% decrease in cross-border mergers and acquisitions, it still managed to maintain positive net sales, unlike Argentina. Although Chile’s outbound FDI flow saw a substantial drop, the country’s overall FDI landscape remains promising. The comparative analysis reveals that while Argentina and Brazil have their strengths, particularly in the energy, mining, and technology sectors, Chile’s steady growth and high absolute volumes of FDI inflows reflect its stable economic framework and investor-friendly policies. As Chile continues to enhance its competitive edge, it is well-positioned to attract further foreign investment, reinforcing its status as a key player in Latin America’s economic landscape.

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Focus on Innovation and Competitiveness

“We will seek to attract innovation, knowledge, technologies, and management systems that will improve work and companies by making them more productive and competitive,” the 65-year-old president highlighted in front of different invited actors. Previously, the head of the Economy, Gabriela García, expressed that Guatemala regained investors’ trust thanks to the current government’s transparency policy.

Establishment of the Investment Promotion Agency

As part of the Guatemala National Strategy to Attract Foreign Direct Investment, the creation of the National and Foreign Investment Attraction Agency was advanced. This agency will be actively dedicated to promoting investments. The National Strategy to Attract Foreign Direct Investment prioritizes traditional sectors with a successful investment history and already existing commercial dynamics. These sectors include processed foods and beverages, clothing, textiles, business services, contact centers, and the BPO (business process outsourcing) sector.

Infrastructure and Human Capital Development

At the same time, she added, “The government continues working to modernize the country’s infrastructure and strengthen human capital formation processes.” She highlighted these efforts to improve Guatemalan competitiveness so that companies representing more sophisticated sectors, such as electrical-electronics, health services, biotechnology, medical devices and equipment, and tourism, will invest in the medium term. The Minister said the strategy also focuses on markets with which Guatemala already has a commercial relationship, supported by 19 investment agreements and 14 free trade agreements. She mentioned the United States, Mexico, Colombia, Spain, South Korea, Japan, Taiwan, India, Germany, the Netherlands, and the United Kingdom.

In conclusion, the Guatemala National Strategy to Attract Foreign Direct Investment marks a significant step towards strengthening the country’s economic framework and fostering a more conducive environment for foreign investments. By focusing on both traditional and emerging sectors and leveraging existing trade agreements, Guatemala aims to position itself as a competitive destination for global investors. This strategic approach and ongoing infrastructure improvements and institutional reforms underscores the government’s commitment to sustainable and inclusive economic growth.

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On June 13, 2024, the Government of Guatemala launched the Guatemala National Strategy to Attract Foreign Direct Investment. This document is an instrument to boost economic activity and promote new opportunities during the current administration’s four years in office. At the event, the Guatemalan president, Bernardo Arévalo, specified the reconstruction and expansion of infrastructure and the promotion of institutional reforms such as the Competition Law.

Guatemala’s Competition Law

Guatemala’s competition law, established by the “Ley de Competencia,” enacted in 2016, is a testament to the country’s commitment to promoting and ensuring fair competition within the market. This law, designed to be fair and just, should instill confidence in Guatemala’s commitment to fair business practices. The law prohibits anti-competitive agreements like price-fixing, market-sharing, and bid-rigging to prevent collusion. It also addresses the abuse of dominance by prohibiting predatory pricing and exclusive dealing. Additionally, the law regulates mergers and acquisitions to avoid substantially lessening competition. Furthermore, it tackles various forms of unfair competition, including misleading advertising, defamation of competitors, and exploitation of another’s business reputation. Enforcement of the competition law is overseen by the Superintendencia de Competencia (Superintendency of Competition), which has the authority to investigate suspected anti-competitive practices, impose fines, and take other necessary actions to ensure compliance. Sanctions for violations can include substantial fines and orders to cease anti-competitive behavior. The law also features a leniency program, offering reduced penalties for companies that voluntarily report their involvement in anti-competitive practices and cooperate with authorities. Legal procedures outlined in the law ensure due process during investigations, hearings, and appeals. Guatemala’s competition law strives to create a competitive market environment that benefits consumers, businesses, and the economy by preventing anti-competitive practices and promoting fair competition.

Presidential Commitment to Economic Growth

However, the president stated, “We are aware that there is much that can be done from the Executive, from the Ministry of Economy specifically, to open more opportunities for growth and development.” The Guatemala National Strategy to Attract Foreign Direct Investment document reflects our commitment to creating a different future for the nation, with the generation of quality employment and environmentally responsible investment,” the head of state stressed. Arévalo expanded, “The strategy is a shared vision for the well-being and prosperity of Guatemalans and reflects the conviction that we can and must create an environment where investment becomes an engine for inclusive and equitable development.”

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Focus on Innovation and Competitiveness

“We will seek to attract innovation, knowledge, technologies, and management systems that will improve work and companies by making them more productive and competitive,” the 65-year-old president highlighted in front of different invited actors. Previously, the head of the Economy, Gabriela García, expressed that Guatemala regained investors’ trust thanks to the current government’s transparency policy.

Establishment of the Investment Promotion Agency

As part of the Guatemala National Strategy to Attract Foreign Direct Investment, the creation of the National and Foreign Investment Attraction Agency was advanced. This agency will be actively dedicated to promoting investments. The National Strategy to Attract Foreign Direct Investment prioritizes traditional sectors with a successful investment history and already existing commercial dynamics. These sectors include processed foods and beverages, clothing, textiles, business services, contact centers, and the BPO (business process outsourcing) sector.

Infrastructure and Human Capital Development

At the same time, she added, “The government continues working to modernize the country’s infrastructure and strengthen human capital formation processes.” She highlighted these efforts to improve Guatemalan competitiveness so that companies representing more sophisticated sectors, such as electrical-electronics, health services, biotechnology, medical devices and equipment, and tourism, will invest in the medium term. The Minister said the strategy also focuses on markets with which Guatemala already has a commercial relationship, supported by 19 investment agreements and 14 free trade agreements. She mentioned the United States, Mexico, Colombia, Spain, South Korea, Japan, Taiwan, India, Germany, the Netherlands, and the United Kingdom.

In conclusion, the Guatemala National Strategy to Attract Foreign Direct Investment marks a significant step towards strengthening the country’s economic framework and fostering a more conducive environment for foreign investments. By focusing on both traditional and emerging sectors and leveraging existing trade agreements, Guatemala aims to position itself as a competitive destination for global investors. This strategic approach and ongoing infrastructure improvements and institutional reforms underscores the government’s commitment to sustainable and inclusive economic growth.

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The free zone sector in the Dominican Republic has experienced unprecedented growth in recent years and has also emerged as a significant contributor to the national economy. Its role as an engine of prosperity is evident in the record figures in exports and productive sector diversification. Equally important is its contribution to job creation, further demonstrating these special production areas’ crucial role in the country’s socioeconomic development.

Booming Exports

The total exports from the free zones in May 2024, amounting to $814.7 million, surpassed the April figures by $41.4 million. This consistent growth is a testament to the sector’s competitiveness and dynamism, solidifying the Dominican Republic’s position as a significant player in the global market.

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Medical and Pharmaceutical Products: Reaching $1.2 billion this year, this sector represents 17% of total exports. The Dominican Republic has established itself as a significant exporter of medical devices thanks to its strategic location, favorable trade agreements, and growing manufacturing capabilities. Key medical devices exported include surgical instruments, diagnostic equipment, medical disposables like syringes, catheters, IV sets, and orthopedic devices such as implants and prosthetics. These exports highlight the Dominican Republic’s role in the global medical device supply chain, providing critical healthcare products to markets worldwide.

Tobacco and its Derivatives: With $512.6 million in exports, the tobacco sector experienced a significant 9% growth compared to 2023. The Dominican Republic’s reputation for high-quality tobacco and tobacco derivatives has solidified its position as one of the world’s leading exporters. The primary export, premium cigars, is highly sought after for their craftsmanship and the quality of Dominican tobacco. Additionally, the country exports raw tobacco leaves, cut filler tobacco, and processed tobacco derivatives such as cigar wrappers and binders, further highlighting its prominent position in the global tobacco market.

Electrical and Electronic Products: Exports in this sector totaled $495.2 million, showing an upward trend. The Dominican Republic exports various electrical and electronic products, contributing significantly to the global supply chain. Key exports include electronic circuits, insulated wire and cable, electrical transformers, and capacitors. The export portfolio also consists of other electrical machinery and equipment, reflecting the country’s growing expertise and capability in the electronics sector. These products contribute significantly to the national economy and underscore the Dominican Republic’s role as a competitive player in the international market for electrical and electronic goods.

Jewelry: This year, the jewelry industry has exported $315.1 million. The Dominican Republic exports a variety of jewelry items, focusing significantly on pieces made from its native gemstone, Larimar. Larimar jewelry includes rings, necklaces, earrings, and bracelets, often set in silver or gold. Additionally, the Dominican Republic exports jewelry made with amber and other precious metals like gold and silver. The craftsmanship and quality of Dominican jewelry make it a notable player in the global jewelry market.

Plastic Articles: The Dominican Republic’s exports of plastic articles have reached $105 million. The country exports a variety of plastic articles, including plastic packaging materials, household goods, industrial components, and furniture. These products are valued for their durability, versatility, and cost-effectiveness, making them popular in domestic and international markets.

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Significant Contributions to Dominican economic growth

Free zones have generated a positive impact on Dominican economic growth, employment, and social well-being:

Jobs: Free zone parks register more than 197,000 jobs, with more than half occupied by women. This represents over 100,000 jobs, promoting gender parity and driving social development.

Foreign Investment: Free zones attract foreign direct investment, contributing to the transfer of technology, knowledge, and best business practices.

Regional Development: Free zones in different regions of the country encourage local development and decentralize employment opportunities.

Sustainable Growth

The National Council of Free Zones has established strategies to guarantee the sustained growth of the sector, focusing on:

Diversification of Sectors: Expanding the range of exported products to reduce dependence on specific items.

Attracting New Investments: Bringing in high-tech and value-added companies.

Strengthening Training: Improving the skills and competencies of personnel working in free zones.

Infrastructure Modernization: Investing in improving infrastructure and logistics of industrial parks.

The rise of free zones has been pivotal in driving Dominican economic growth. These zones have bolstered the nation’s economy through significant contributions to exports, job creation, and regional development. As the Dominican Republic continues diversifying its production and attracting foreign investments, the future looks promising for sustained growth and prosperity. The strategic initiatives set by the National Council of Free Zones will further cement the sector’s role as a cornerstone of Dominican economic growth, ensuring continued success and development in the years to come.

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The Importance of Commercial Ties Between Argentina and Germany

The German head of government, the Social Democrat Olaf Scholz, and the Argentine president, Javier Milei, recently held a meeting in Berlin where they discussed various issues of bilateral interest. The leaders addressed trade, economic, and energy relations and global climate protection to strengthen the commercial ties between Argentina and Germany. One of the main points of the meeting was the negotiation of a trade agreement between the European Union (EU) and the Mercosur countries. Scholz and Milei agreed on the need to complete these negotiations quickly, intending to facilitate greater commercial exchange and cooperation between the blocs.

The central topic was commercial ties between Argentina and Germany

The Argentine ambassador to Germany, Fernando Brun, highlighted that economic relations were a central topic at the meeting. According to Brun, it is a favorable time to close agreements in critical areas, such as the extraction of lithium, a resource of great importance for the manufacture of batteries and the energy transition in Germany. This interest reflects Germany’s desire to expand commercial ties between Argentina and Germany to diversify its sources of supply for critical minerals, reducing its dependence on China.

Commercial ties between Argentina and Germany are based on foreign investment, cooperation in natural resources, and commercial exchange. Both countries have developed bilateral agreements and joint projects to promote economic and technological development. Germany is significant in Argentina’s automotive, technology, and manufacturing sectors. This places the European country eighth in Foreign Direct Investment (FDI) after the United States, Spain, Brazil, the Netherlands, Chile, China, and Italy. According to the German Chamber of Industry and Commerce (AHK) and an Argentine consulting firm, 74% of German companies plan to invest more than one hundred million dollars in Argentina, mainly in fixed assets and technology.

The Bilateral Commercial Ties Between Argentina and Germany in Focus

The economic relationship between Argentina and Germany is robust and multifaceted, marked by significant trade in goods and services and substantial foreign direct investment (FDI) flows. These interactions underscore the mutual economic benefits and highlight each country’s strategic importance in maintaining and expanding their commercial ties.

Trade in Goods and Services

Goods Trade

Germany is one of Argentina’s key trading partners within the European Union. The bilateral trade in goods encompasses a wide range of products. On the export side, Argentina primarily sends agricultural products to Germany, including soybeans, wine, fruits, and meat. These exports reflect Argentina’s strength in agribusiness and its position as a leading global food producer.

Conversely, Germany exports a variety of industrial goods to Argentina. Prominent among these are automobiles and auto parts, machinery, and chemicals. Germany’s strong industrial base and technological prowess make it a vital supplier of high-quality manufactured goods to Argentina. The automotive sector, in particular, plays a significant role, with German brands being highly popular in the Argentine market.

Services Trade

The commercial ties between Argentina and Germany in the services sector are also noteworthy. Argentina exports professional services, particularly in the IT and software development sectors. Argentine tech companies have increasingly outsourced software solutions, IT services, and business processes to German firms. Argentina’s creative industries, including film and television production, have also found a receptive market in Germany. On the other hand, Germany offers Argentina a range of services, including engineering, consulting, and financial services. German expertise in these areas supports various sectors of the Argentine economy, from infrastructure projects to financial management.

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Foreign Direct Investment

German Investment in Argentina

Germany has a long history of investing in Argentina, with numerous German companies establishing a solid presence there. The sectors attracting significant German FDI include automotive, chemicals, pharmaceuticals, and renewable energy. Companies like Volkswagen, BASF, and Siemens have substantial operations in Argentina, contributing to local employment and economic growth.

The automotive sector, in particular, has seen considerable investment from German firms. Volkswagen, for instance, has manufacturing facilities in Argentina that produce vehicles for the domestic market and export. This investment enhances Argentina’s industrial capabilities and integrates the country into the global automotive supply chain.

Argentine Investment in Germany

While Argentine FDI in Germany is smaller in scale, it is nonetheless significant, particularly in the agricultural and food sectors. Argentine companies have invested in food processing and distribution facilities in Germany, ensuring a steady supply of high-quality Argentine products to the European market. Additionally, some Argentine firms have ventured into the renewable energy sector in Germany, reflecting a shared commitment to sustainable development.

Strategic and Future Directions

The economic relationship and commercial ties between Argentina and Germany are poised for further growth, driven by mutual interests and complementary strengths. Both countries are keen on expanding trade and investment ties, particularly in emerging sectors such as renewable energy, digital technology, and biotechnology.

Various agreements and forums also support the bilateral relationship to foster economic cooperation. For instance, the Argentina-Germany Binational Commission on Economic Relations provides a platform for dialogue and collaboration, addressing issues ranging from trade barriers to investment opportunities.

The economic ties between Argentina and Germany are characterized by a dynamic exchange of goods and services and significant FDI flows. These interactions bolster the economies of both countries and pave the way for deeper cooperation in the future. As both nations continue innovating and adapting to global economic trends, their bilateral relationship will grow even stronger, benefiting businesses and consumers.

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The Free Trade Agreement between Central America, the Dominican Republic, and the United States (CAFTA-DR) has been a key tool for economic integration, job creation, and commercial development since its implementation in 2006. With a strong focus on job creation, this agreement seeks to eliminate tariff barriers, facilitate trade, and encourage foreign direct investment. Almost two decades after its implementation, evaluating the impact of the CAFTA-DR  on the participating economies is crucial using the most recent macroeconomic data available. The agreement has not only boosted economic growth but also led to the creation of numerous jobs, contributing significantly to the social well-being of the region.

Trade Growth

Since the entry into force of CAFTA-DR, member countries have experienced a significant increase in their foreign trade. According to data from the World Bank, the volume of goods and services exported by the region has grown by 5% annually on average. This growth has been particularly notable in sectors such as textiles, agricultural products, and light manufacturing, which have found a robust market in the United States, a testament to the strength of the trade relationship. For example, exports of textiles and clothing from Honduras to the United States increased by more than 50% in the first ten years of the agreement. Likewise, Costa Rica has seen an increase in the export of technological products and services, consolidating itself as a technological hub in the region.

Foreign Direct Investment

Foreign Direct Investment has been one of the largest beneficiaries of CAFTA-DR. The liberalization of markets and the legal guarantees offered by the treaty have attracted a constant influx of foreign capital, providing a significant boost to the region’s economies. In 2023, according to the Economic Commission for Latin America and the Caribbean (ECLAC), the region received approximately $15 billion in FDI, with Costa Rica and the Dominican Republic leading this indicator. Costa Rica, in particular, has used the agreement to diversify its economy. It has attracted significant investments in the information technology and biotechnology sectors, a clear sign of the agreement’s role in fostering economic diversification and attracting high-value sectors, reassuring the region about the long-term economic benefits of the agreement.

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Challenges and the Impact of CAFTA-DR

One of the main challenges is the competition that local producers face against subsidized products from the United States, especially in the agricultural sector. While more diversified economies, such as Costa Rica and the Dominican Republic, have taken advantage of the opportunities of the agreement, countries with economies more dependent on a single sector, such as Nicaragua and El Salvador, have seen more limited growth.

Future Outlook

As the global economy faces new challenges, including high inflation, geopolitical tensions, and post-pandemic economic uncertainty, CAFTA-DR countries must strengthen their cooperation and seek to diversify their economies further. Initiatives to improve infrastructure, education, and technological innovation will be crucial to maintaining competitiveness and attracting sustainable investments.

The impact of CAFTA-DR has been positive on the economies of its member countries, increasing trade, foreign investment, and employment. However, it has also presented challenges that require strategic policies to ensure more sustainable economic development. The key will be the ability of these countries to adapt and maximize the opportunities offered by the treaty while addressing the internal barriers that limit their full potential.

Case Study: Costa Rica

Costa Rica has been one of the largest beneficiaries of CAFTA-DR, becoming a model of how a country can transform its economy through trade and foreign investment. With a diversified economy, Costa Rica has taken advantage of the treaty to attract investments in high-value-added sectors such as technology, biotechnology, and medical services. Multinational companies such as Intel, Microsoft, and Amazon have established significant operations in the country, generating employment and technology transfer. The services sector has grown significantly, with exports representing 45% of the country’s total exports in 2023. However, despite these successes, Costa Rica faces important challenges, such as improving its infrastructure. Education remains critical to ensure that the workforce can meet the demands of an increasingly sophisticated market. Costa Rica must continue investing in education and technology, especially semiconductors, to maintain its competitiveness and consolidate the benefits of CAFTA-DR.

The impact of CAFTA-DR on the economies of Central America and the Dominican Republic has been transformative. The agreement has facilitated substantial trade and foreign direct investment growth, benefiting more diversified economies like Costa Rica and the Dominican Republic. These countries have successfully attracted investments in high-value sectors, leading to increased economic diversification and technological advancement. However, challenges remain, particularly for less diversified economies that struggle with competition from subsidized U.S. products. Moving forward, CAFTA-DR member countries must strengthen cooperation, invest in infrastructure and education, and foster technological innovation. These nations can ensure sustainable economic development and continued prosperity in an increasingly competitive global market by addressing these challenges and maximizing CAFTA-DR’s opportunities.

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