LATAM: How foreign direct investment is changing numerous market landscapes
Following the coronavirus pandemic, the notion of foreign direct investment (FDI) has become increasingly important, as economic scarcities coupled with the closing off of flows of capital between countries has meant that many of us have encountered struggles the likes of which were previously alien. Latin America is an interesting example of this, as the differences between countries in terms of their level of FDI vary. As well as this, with increased development taking place in numerous sectors across the region, the recovery stage of the pandemic could well be the catalyst for increased foreign investment to stabilise the growth of the region’s economy as well as to further entice global corporations to see Latin America as the future for innovation.
Before getting into the effects of FDI in the region, allow us to define it for you in case it is a new concept you have not encountered before. In short, it is when a company from outside of the borders of the nation where your company operates buy interest in said company, in effect, allowing them to expand their overseas influence and gain access to the benefits to be found in the country where your business is based. There are a number of reasons why some countries and regions are more prone to FDI than others, some of which include:
· Skilled workforces
· Incentives for foreign businesses to invest
· Pre-existing infrastructure
Before looking into our two specific examples for today, we will broaden the Latin American context a little more. As you will be aware should you follow our blog, we have investigated a term called nearshoring, outsourcing but to nations much closer geographically than other traditional examples, which causes Latin America to find itself in an advantageous position with regards to the US and Europe. Factors such as time zones and language barriers further reinforce the pull factors to the region for foreign businesses and could therefore make it the answer for US FDI following the pandemic.
Our first specific example for FDI in Latin America is Chile, where rapid technological development and a highly skilled workforce has allowed the nation to gain international attention. Subsequently, it has allowed itself to become the trailblazer for post-pandemic FDI, securing over US$14.8 billion in only the first 7 months of the year, which, to put it into perspective, is 74% higher than last year as a whole. While we all know that last year in many ways was a write off, recovery is extremely important, and this figure serves as proof that Latin America is a potential candidate for outsourcing and business expansion solutions for foreign businesses in a post-coronavirus world. Green energy and global services lead the way as pull factors for foreign business investment and with innovation in these sectors occurring across other nations in the region, perhaps Chile is only the beginning.
Taking a slightly different approach with our other example for today, Colombia is trying to attract FDI directly as a consequence of the coronavirus pandemic, primarily through job creation. The scheme in play at the moment has the goal of creating US$11.5 billion by 2022 in FDI that does not include energy projects and by identifying over 500 other businesses across the globe, and reaching out to these foreign businesses, the chances of attracting investment are even higher. The strategy in Colombia is different to Chile in many ways, and this is partly what makes the region so interesting in terms of FDI, as by having diversity in terms of investment options, in a post-pandemic world the possibilities are seemingly endless for the region to continue developing. If you are a business owner looking to relocate overseas, perhaps these reasons could be tempting.
So, if you are interested in finding out more, get in touch with us today! At Creimerman, we are a team of global citizens, working with each client and providing a tailor-made service in order to help make their cross-border ventures a success, and we would love you to be the next.