Economy

Foreign Direct Investment (FDI) to Brazil plunged by 62.1% in 2020

It is the first time in two decades that the country is behind Mexico in attracting Foreign Direct Investment (FDI); Latin America had a 45% FDI drop

Brazil received 62.1% less foreign investment in 2020
Photo: Roberto Herrera Peres/Shutterstock
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  • FDI to Brazil, the largest recipient in Latin America, plunged by 62% to $25 billion – its lowest level in two decades;
  • Latin America recorded an extraordinary $73 billion reduction of FDI in 2020;
  • Among the five Latin American countries with more FDI flow, besides Brazil and Mexico, are Chile, Colombia and Argentina. FDI flows to them declined too last year.

For the first time in two decades, Mexico surpassed Brazil in attracting Foreign Direct Investment (FDI) in 2020, as shown in the World Investment Report released this Monday (21) by the United Nations Conference on Trade and Development (UNCTAD), of the United Nations (UN).

The report also shows that the global FDI flow last year had a 35% drop, reflecting the COVID-19 pandemic. FDI flows to Latin America plummeted by 45% in 2020 to $88 billion, which represents less $73 billion for the region.

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“The region suffered the sharpest FDI declines in developing countries. Latin American economies faced with collapse in export demand, falling commodity prices and the disappearance of tourism, leading to one of the worst contractions in economic activity across the world,” said UNCTAD’s director of investment and enterprise, James Zhan.

In the ranking of world economies that most received foreign investment, Brazil dropped from the sixth position in 2019 to 11th position last year; Mexico, on the other hand, rose from 14th to ninth.

Considering the volume invested by multinationals in Brazil, the country received US$ 24.7 billion in 2020; in 2019, this volume was $65.4 billion, a drop of 62.1% and the smallest amount of capital in two decades. Mexico received US$ 29.1 billion in 2020 and 34.1 billion in 2019, a contraction of 14.7%.

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Among the five Latin American countries with more FDI flow, besides Brazil and Mexico, are Chile, Colombia and Argentina. FDI flows to them declined too last year.

Top 5 recipients of FDI flows, 2019 and 2020 – Latin America and the Caribbean:

Graphic: UNCTAD, World Investment Report 2021

In Brazil, the FDI drop mainly affected the sectors of transport and logistics (- 90%), financial services (-68%), electricity and gas services (-62%) and trade (-33%). Brazilian multinationals also slowed down investments abroad at $26 billion, according to UNCTAD, as a strategy to reinforce investments in the country’s units.

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According to a projection by the UN agency, the FDI flows for Latin America should return to the pre-pandemic level only in 2023; this year and next, FDI inflows are forecast to remain weak.

In addition, according to UNCTAD, political uncertainties still hang over the region, due to the presidential elections in Brazil, Chile and Colombia, and uncertainties regarding the control of the pandemic.

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