Chile 2013 Blog: FDI in Chile Breaking Records
While the Pacific Alliance bloc will see a total of $2.1 trillion invested from 2013 through 2016, Chile leads the group not only as a recipient, but also as an investor.
Over the next four years, the Pacific Alliance group of countries is expected to receive $2.1 trillion in total investment, according to local estimates. Chile is projected to receive $102 billion in investments from 2013 to 2016, with 82 percent stemming from private funding. The group’s largest economy, Mexico, is slated to receive the highest share of investment—$1.25 trillion, or 59 percent of the total funding. Foreign direct investment (FDI) will form an important part of these funds. The UN's World Investment Report 2013, which analyzes FDI trends, says Pacific Alliance members Chile, Colombia, Mexico, and Peru accounted for 26 percent of total FDI received by Latin America and the Caribbean in 2012. Executive Vice President of the Committee of Foreign Investments in the Chilean Ministry of Economy Matías Mori notes that in recent years, Chile has received “record amounts” of investments. “While the flows of FDI at the global level dropped 18 percent and those in Latin America [dropped] 2.2 percent, capital invested in Chile grew 32.2 percent,” he said.
In Latin America, FDI inflows hit $244 billion in 2012, due to the “mix of natural-resource-seeking and market-seeking activity,” says the UN report. From 2011 to 2012, South America had a 12 percent increase in inward flows, reaching $144 billion. Chile’s “economic buoyancy” as well as the expanding middle class drove growth on the continent, and the country fell second only to Brazil as the region’s top FDI recipient. In addition, a February 2013 report by the Inter-American Development Bank credits Chile as the top country in Latin America and the Caribbean for its development of public-private partnerships, noting its investment climate as the main reason for success.
Chile is among the top countries not only as a recipient of flows, but also as an investor. Latin American transnational corporations, or multilatinas, increased cross-border mergers and acquisitions in 2012 to reach $33 billion, a 74 percent increase from 2011. In Chile, companies are among the most active purchasers abroad as investment outflows grew 4 percent to reach $21 billion in 2012. Brazil has been the major recipient of Chilean investment in the last decade. In 2012, LAN Chile acquired Brazilian airline TAM for $3.4 billion, while grocery store acquisitions worth over $3 billion allowed Chilean retailer Cencosud to extend its reach in Colombia and Brazil. Another food retailer, Nutresa, the largest publicly traded food company in Colombia, has inked a merger with Chile’s Tresmontes Lucchetti group to the tune of $785 million. In Lima, a recent acquisition of Lima Gas by Chilean energy supplier Lipigas has made it Chile’s first gasoline distributor with a presence in three countries in the region. Chile’s energy sector is the country’s top recipient of FDI, receiving approximately $44 billion in investment.