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FDI Inflows in Chile Increased by 24.6% in 2023: UNCTAD Report

by | Jun 30, 2024

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

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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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