,

Support for Foreign Investment in Latin America

By Federico Mazzella ,
Home  /  Ideas de Integración  /  Support for Foreign Investment in Latin America
Categorías:
  Ideas de Integración Integration Ideas n243

Print this article

Some 71% of Latin Americans say that foreign capital is beneficial for local economies.

In a global context of low interest rates, Latin America offers a range of investment opportunities for capitals that are willing to take a gamble on the region. How do Latin Americans perceive the arrival of these capitals? Do they think that foreign investment is beneficial or harmful to development? As is the case with integration, support for investment is very high. Some 71% of Latin Americans say that foreign capital is beneficial for local economies, while only 15% believe it to be harmful.

Over the last 20 years there has been a decrease in the proportion of the population that reject foreign investment. This peaked at 20% in 1998, but the share of those who believe it to be beneficial has gradually increased. However, the share of the population that would rather not give an opinion on the matter increased from 10% in 1998 to 14% in 2016.

Opinion on Foreign Investment

Q: Do you think that, in general terms, foreign investment is beneficial or harmful to the economic development of your country or are you not familiar enough with the issue to give an opinion?

Responses for the entire region                   Responses by country—beneficial

243_e_ideas2_img1

Source: INTAL based on Latinobarómetro 2016 data.

 

Looking at answers by sector, foreign investment is more welcome if it targets agricultural production. Some 46% of respondents think that it is positive for foreign capital to invest in the agriculture sector, 35% in chemicals and medicines, and 30% in energy and water services and the automobile industry.

 

Sectoral Opinions on Foreign Capital

Q: Which of the following industries do you think benefit from receiving foreign capital? Responses for the entire region

243_e_ideas2_img2

Source: INTAL based on Latinobarómetro 2016 data. 2016—multi-answer response, percentages add up to more than 100.

In relation to the agricultural sector, which was the most frequently selected option, Venezuela was the country that was most in favor of receiving foreign capital, with 63% support ratings, followed by Nicaragua with 60%, and Ecuador with 58%. Those that were most reluctant to receive such investment include four Southern Cone countries: Brazil (36%), Uruguay (38%), Chile (25%), and Argentina (19%). The population often tends to show greater support for foreign investment in those sectors that are most competitive and play a leading role in their respective economies. This is the case for telecommunications in Costa Rica, for the automotive industry in Brazil, and the mining industry in Peru. However, this rule is not always true: in Argentina, which has low acceptance rates of foreign investment in four of the nine sectors, support for foreign capital in the agricultural industry is low.
The Economies That Are Most Open to Receiving Capital

Featuring in 32% of responses at the regional level, the promotion of domestic and foreign investment was one of the issues that respondents most associated with integration (after free trade, political dialogue, and the mobility of people). Which economies rank investment promotion highest? Ecuador, Uruguay, Paraguay, and Chile, where more than 35% of citizens made a connection between integration and the promotion of domestic and foreign investment.

Cross-referencing objective and subjective indicators reveals that these economies are also the ones with the highest levels of exports per inhabitant as there is an empirical correlation of 0.63 between mentions of investment promotion as a distinctive feature of integration and export capacity.

Importance Placed on Investment Promotion as a Feature of Integration and Exports Per Capita

Q: Which of the following options do you think have to do with integration in Latin America? Responses for investment promotion.

243_e_ideas2_img3

Source: INTAL based on Latinobarómetro 2016 data.

 

Another way of identifying if the effect of investments are perceived by the population is by comparing actual foreign investments with perceptions of the impact of integration strategies on amounts of capital received. The correlation is also positive in this instance and stands at 0.64. The countries that most perceive the impact of integration on investment are also those that receive most investment capital.

Perception of the Impact of Integration on Investment and Actual Investment Received

243_e_ideas2_img4Source: INTAL based on Latinobarómetro 2016 data.

Two paradigmatic examples of this are Chile and Panama, the countries that received most foreign investment in relation to their gross domestic product and where perceptions of the impact of integration on investment also outstripped the regional average. At the other extreme, countries that received little foreign capital, such as Guatemala, Venezuela, Mexico, and El Salvador, revealed lower levels of perception of the impact of integration on foreign investment.

(Extract from the Technical Note The DNA of Regional Integration)

 

this post was shared 0 times
 000