The flows of foreign direct investment (FDI) into Latin America and the Caribbean shrank 7.9 percent in 2016 compared with 2015, totaling $167.043 billion dollars, which represents a 17 percent decline from the peak reached in 2011, the regional commission revealed today at its headquarters in Santiago, Chile.

Panama drew 44 percent of the funds coming into Central America, and Costa Rica 27 percent, while in the Caribbean the Dominican Republic received 49 percent of the subregion’s FDI and Jamaica 16 percent, according to the report.

In 2016, Latin America and the Caribbean received 10 percent of global FDI, a similar share to 2015 but below the 14 percent average that had been achieved between 2011 and 2014. Despite this downward trend, FDI flows represent 3.6 percent of the region’s gross domestic product (GDP), while the global average is 2.5 percent, which shows the relevance of these intakes for Latin American and Caribbean economies.

This outcome is due to several causes. Low commodities prices has had a negative impact on investments made in the natural resources sector, as has slow growth in economic activity in various economies, and the global scenario of technological sophistication and an expanding digital economy that tends to concentrate transnational investment in developed economies, according to the annual report Foreign Direct Investment in Latin America and the Caribbean 2017, presented this Thursday at a press conference.

In 2017, ECLAC projects a fresh decline in FDI inflows, of around 5 percent.

“Foreign direct investment has been an important factor for the development of export activities that are key to the growth of Latin America and the Caribbean, as well as for the creation of new sectors. But the big productivity gaps that persist in the region and the new technological scenarios that the fourth industrial revolution poses, require new policies to harness the benefits of FDI in national processes of sustainable development,” said Alicia Bárcena, ECLAC’s Executive Secretary.

Bárcena also called for paying close attention to the fact that in several countries of the region, capital outflows from FDI income surpassed inflows in the 2010-2016 period.

Despite the recession, Brazil experienced a 5.7 percent increase in its FDI inflows in 2016 and remained the main receiving country in the region ($78.929 billion dollars, equivalent to 47 percent of the total). In Mexico, which received $32.113 billion dollars and was the second-biggest recipient (19 percent of the total), FDI fell 7.9 percent, but stayed at high levels in historical terms.

Inflows into Colombia grew 15.9 percent to $13.593 billion dollars, positioning that country as the third-biggest economy for FDI intakes (8 percent of the total), above Chile, which absorbed $12.225 billion dollars of FDI (7 percent).

FDI aimed at the natural resources sector fell from 18 percent in 2010-2015 to 13 percent in 2016, in line with the end of the boom in commodities prices. In contrast, the weight of manufacturing and services rose to 40 percent and 47 percent, respectively.

The new investments announced were concentrated in renewable energy, telecommunications and the automotive industry. Renewable energy projects represented 18 percent of the total amount announced in 2016 (in 2005-2010 that figure was 6 percent), meaning this activity was the most dynamic in the time period, especially in Chile and Mexico.

With regard to the investing countries, the study indicates that they have not diversified: 73 percent of total FDI came from the United States (20 percent) – which is the top individual investor – and the European Union (53 percent).

According to official statistics, China was responsible for just 1.1 percent of the FDI received by the region in 2016, a figure that likely underestimates the presence of Chinese capital in Latin American and Caribbean countries. In fact, if one observes the value of mergers and acquisitions in 2016, the Asian giant was the fourth-biggest source of investment. Given the major deals that China has made in the first half of 2017, it is to be expected that its share will increase next year, the document states.

The report also confirms that 2016 was a weak year for Latin American transnational companies, known as “translatinas.” FDI outflows from countries in Latin America and the Caribbean dropped 50 percent to total $24.609 billion dollars.