Chile is the main destination for foreign investment in Latin America

With resources totaling US$ 5.7 billion, Chile was the favorite country in the region for international investors during the first quarter of 2010.

Chile was the favorite country in the region for international investors during the first quarter of 2010.

Latin America has already overcome the crisis and Chile is one of the countries leading that rebound. According to a UN report, direct foreign investment (DFI) in the region showed strong growth of 20% in the first quarter of the year compared to the same period in 2009.

In Chile it was 50%, which led the country to pass other leading Latin American economies like Brazil and Mexico, the historic leaders in this area according to the document by the UN Conference on Trade and Development (UNCTAD).

Thus, foreign capital invested in Chile in the first three months of the year totaled US$ 5.7 billion, reversing the drop experienced in 2009, when it was a total of US$ 12.702 billion, which in turn represented a 16% drop compared to the year before.

The report detailed that this drop had been due to a reduced level of profit reinvestment and a sharp fall in mergers and multinational acquisitions, a scenario that has been totally reversed this year with a capital flow showing clear signs of reactivation.

Likewise, UNCTAD document alludes to the reasons that explain this swift regional recovery, in which the rise of Latin American multinational firms has played a key role as they have reinforced their positions in terms of foreign investment.

In addition, the report recommends increased efforts to attract foreign investments in activities with a low carbon footprint, so as to surpass the US$ 90 billion invested in this area in 2009, complemented by appropriate industrial, social and competition policies.

Investments in green energies

One of the areas that the UNCTAD highlighted the most about Chile was the development of green energies in the country, partially thanks to the incentives provided by the Nonconventional Renewable Energy Act, which establishes a target of 5% of electricity produced in the country from clean sources by the end of the year. After that the proportion must be increased by 0.5% annually until reaching 10% in 2024.

To achieve these targets the Chilean Government is incentivizing investments in the sector “through support for private initiatives, thanks to the guaranteed access to the grid for renewable energy projects, a tax break for renewable energy projects with a capacity of less than 20 MW (…) and lines of credit for nonconventional renewable energy projects for up to US$ 15 million, including loan guarantees,” the study recalled.

UNCTAD also highlighted projects in this sector that multinational firms are undertaking in Chile, such as Britain’s Seawind, GDF Suez of France, and the Italian firm ENEL.