U.N. report confirms:
Chile receives third highest level of FDI in Latin America
In addition to attracting record levels of Foreign Direct Investment in 2011, Chile also led the region in investing internationally, according to the ECLAC study.
Tuesday, May 15, 2012
Copper mining continues to attract the lion’s share of FDI, but leads to investment in other sectors. (Photo courtesy of Codelco)
Chile set a new national record for Foreign Direct Investment (FDI) in 2011, growing by 15 percent to reach US$17.3 million and receive the third highest total FDI in Latin America, according to a recent report by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC - commonly known as CEPAL for its Spanish acronym).
The figures set by the Andean nation were only superseded by regional giants Brazil and Mexico, despite Chile’s comparatively tiny population.
Chile’s FDI in 2011 was US$2.2 million more than in 2010, in which the country received US$15.1 million in investments, confirming “just how attractive the country is to transnational corporations,” according to the ECLAC report.
Raw material industries received the bulk of FDI, with 61 percent of the total going towards the agricultural, aquacultural, forestry and mining sectors. The mining sector in particular represented a huge slice of the pie, especially the nation’s booming copper mines.
The service sector also received a significant amount of foreign capital, attracting 33 percent of total FDI. Of this sector, financial services and electric utilities stood out.
Mining and Service Industries
Mining investment was spearheaded by new operations, projects and expansions of various multinationals, like the Australian-owned BHP Billiton and the U.S. Freeport-McMoRan.
Also highly significant was the acquisition of 25 percent of Anglo American Sur by Japanese conglomerate Mitsubishi for more than US$5 million, and the purchase of 45 percent of the Minera Quadra Chile by the Sumitomo group, for close to US$700 million.
“These cases illustrate the role that various Japanese consortiums have in the financing of mining activities in Chile, demonstrating access to mining resources as an ingredient for other activities,” the report said.
ECLAC highlighted the purchase of the Autopista Central - the highway which dissects the Chilean capital - by Canadian company, Alberta Investment Management Corporation, and the purchase of electricity company Chilquinta Energía, by the United States-based Sempra Energy, as other main sources of FDI in 2011. Both deals were valued at more than US$700 million.
Chilean Investments Abroad
In addition to receiving record levels of investment, Chilean companies also led the region in investing abroad, spending a total of US$11.8 million in overseas investments, a figure which was followed by Mexico, with US$9.6 million and Colombia, with US$8.3 million.
"Chilean companies were mainly geared towards the retail, forestry products and transport sectors,” the report said. “Geographically, subsidiaries remained highly concentrated in Argentina, Brazil, Colombia and Peru.”
“Another example of this tendency was the acquisition of Belgian engineering firm Magotteaux for US$794 million by Sigdo Koppers, and the US$239-million purchase of the Fetzer Vineyards in the United States by the viticulturalist Concha y Toro,” continued the report. “In this way, Chilean businesses have gradually began international expansion throughout the region.”
The principal Chilean investment abroad in 2011 was the construction of the Montes del Plata pulp mill in Uruguay, a strategic alliance between the Chilean company Arauco and Switzerland-based Stora Enso, which totalled US$950 million.
Chile’s performance was in line with a good year for FDI throughout the region, which recorded its second consecutive hike - this time of 31 percent - to reach US$153.5 million, or 10 percent of the world total.
Almost half of the regional investment was absorbed by Brazil, where FDI rose 37 percent to reach US$66.7 million. Next was Mexico, with a 10 percent increase to US$19.5 million. Other South American countries that saw historic highs include Colombia, with US$13.2 million and a stunning increase of 92 percent, and Uruguay, which rose 2 percent to reach US$2.5 million.