Foreign investment flows the highest since 2009
21 de junho de 2016
São Paulo – Global flows of Foreign Direct Investment (FDI) reached their highest level since the 2008-2009 crisis last year. According to the 2016 World Investment Report report released this Tuesday (21) by the United Nations Conference on Trade and Development (UNCTAD), FDI flows reached USD 1.76 trillion last year, a 38% increase over 2014. The primary reason was an increase in mergers and acquisitions, which soared from USD 432 billion to USD 721 billion.
The bulk of investment was made by developed countries, which were also the primary targets, having received 55% of total flows. The United States was the single highest FDI target at USD 380, more than thrice as much as in 2014, when it had ranked third.
Hong Kong remained in second at USD 175 billion. China, the leading target in 2014, fell to the third position at USD 136 billion. The top-20 list continues with Ireland, Holland, Switzerland, Singapore, Brazil, Canada, India, France, United Kingdom, Germany, Belgium, Mexico, Luxemburg, Australia, Italy, Chile and Turkey, in decreasing order.
Brazil lost positions in the ranking. In 2014, it had been the fourth leading FDI destination at USD 73.086 billion. In 2015, it placed eighth at USD 64.6 billion, down 11.5% from the preceding year. UNCTAD remarked that the country is in recession, but that there was investment in industries such as autos and healthcare, the latter of which benefited from laws that made it more attractive. The weakening of Brazilian currency, the real, helped prevent FDI from declining even further. “The falling value of the real also created opportunities to buy Brazilian assets at a discount,” the report reads. “Nonetheless, significant declines in equity investment were registered in industries related to infrastructure.”
Other developing countries such as Singapore, Chile and Turkey also lost positions, but the combined FDI flows into developing countries widened by 9% in 2015 from 2014, to USD 765 billion. The bulk of inflows to these countries went to Asia, which was the target of USD 541 billion worth of foreign investment. Latin America and the Caribbean received USD 168 billion. Africa was the destination of USD 54 billion.
“Looking ahead, FDI flows are expected to decline by 10–15 per cent in 2016, reflecting the fragility of the global economy, persistent weakness of aggregate demand, sluggish growth in some commodity exporting countries, effective policy measures to curb tax inversion deals and a slump in multinational enterprises’ profits,” the report forecasts for this year, adding that had it not been for a significant increase in merger and acquisition activity, FDI flows would have grown less in 2015, by around 15%.
Among the countries that made investments, the top place also belongs to the United States, with its companies investing USD 300 billion abroad. The US is followed by Japan, China, Holland, Ireland, Germany, Switzerland, Canada, Hong Kong, Luxembourg, Belgium, Singapore, France, Spain, South Korea, Italy, Russia, Sweden, Norway and Chile. Among the top 10, only China is a developing nation. The drop in demand, cheap commodities and the devaluation of these nations’ currencies were the reason behind a reduction in investments made by developing countries’ companies.
Among African Arab nations, Egypt was the leading recipient of foreign investments last year, with a total of USD 6.88 billion and an increase of 49.3% over 2014. In second place, Morocco received 11.2% less at USD 3.2 billion.
Among the Middle East’s Arab countries, classified by the report as West Asia, the only one to appear among the main recipients of investments is the United Arab Emirates, the target of USD 10.9 billion last year.
“Depressed oil prices and geopolitical uncertainty continued to affect FDI to oil-producing West Asian countries, with inflow remaining at low levels in Qatar and Saudi Arabia. In Bahrain, inflows declined from USD 1.5 billion in 2014 to a negative USD 1.5 billion in 2015, reflecting major foreign divestments”, said Unctad. Other Arab countries were highlighted as the source of investments in other countries.
“Outflows from West Asia soared by 54% to USD 31 billion, mainly due to the turnaround by Kuwait, a major investor in the subregion. Outflows from the United Arab Emirates rose by 3% to USD 9.3 billion, while those from Saudi Arabia increased by 2%, remaining above USD 5 billion. Regional tensions may have hampered outward FDI flows from Turkish MNEs, which fell by 28% to USD 4.8 billion”, says the document.
In 2015, Middle East countries received USD 42.3 billion in FDI. In the previous year, they received USD 43.2 billion. Nations of North Africa were the destination for USD 12.6 billion in 2015, a higher amount than the USD 11.6 billion received in 2014.
Among the Arab countries, Algeria had a divestment of USD 587 million in 2015, and Libya received USD 726 million; Sudan received USD 1.7 billion; and Tunisia, USD 1 billion. Mauritania received USD 495 million; Comoros, USD 5 million; Djibouti, USD 124 million; and Somalia, USD 516 million. In the Middle East, Iraq received USD 3.46 billion; Jordan, USD 1.27 billion; Kuwait, USD 293 million; Lebanon, USD 2.3 billion; Oman, USD 822 million; Qatar, USD 1 billion; Saudi Arabia, USD 8 billion; Palestine, USD 120 million, UAE, USD 10.9 billion, and Yemen registered a divestment of USD 1.78 billion. The data for Libya, Morocco, Somalia, Oman and Yemen are estimated numbers.
*Translated by Gabriel Pomerancblum and Sérgio Kakitani