2010 Foreign Direct Investment in Latin America and the Caribbean Alicia Bárcena Executive Secretary Antonio Prado Deputy Executive Secretary Mario Cimoli Chief Division of Production, Productivity and Management Ricardo Pérez Chief Documents and Publications Division Foreign Direct Investment in Latin America and the Caribbean, 2010 is the latest edition of a series issued annually by the Unit on Investment and Corporate Strategies of the ECLAC Division of Production, Productivity and Management. It was prepared by Álvaro Calderón, Mario Castillo, René A. Hernández, Jorge Mario Martínez Piva, Wilson Peres, Miguel Pérez Ludeña and Sebastián Vergara, with assistance from Martha Cordero, Lucía Masip Naranjo, Juan Pérez, Álex Rodríguez, Indira Romero and Kelvin Sergeant. Contributions were received as well from Eduardo Alonso and Enrique Dussel Peters, consultants. Comments and suggestions were also provided by staff of the ECLAC subregional headquarters in Mexico, including Hugo Beteta, Director, and Juan Carlos Moreno-Brid, Juan Alberto Fuentes, Claudia Schatan, Willy Zapata, Rodolfo Minzer and Ramón Padilla. ECLAC wishes to express its appreciation for the contribution received from the executives and officials of the firms and other institutions consulted during the preparation of this publication. Chapters IV and V were prepared within the framework of the project “Inclusive political dialogue and exchange of experiences”, carried out jointly by ECLAC and the Alliance for the Information Society (@lis 2) with financing from the European Union. The opinions expressed in those chapters, however, do not necessarily reflect any official position of the European Union. The information used in this report was drawn from a number of international organizations, including the International Monetary Fund, the United Nations Conference on Trade and Development and the Organization for Economic Cooperation and Development, as well as from a host of national institutions, in particular central banks and investment promotion agencies in Latin America and the Caribbean, and the specialized press. Any comments or suggestions regarding this publication may kindly be addressed to Álvaro Calderón ([email protected]) or Miguel Pérez Ludeña ([email protected]). Notes and explanations of symbols The following symbols have been employed in this edition of Foreign Direct Investment in Latin America and the Caribbean, 2010: Notes and explanations of symbols Three dots (...) indicate that data are missing, are not available or are not separately reported. Two dashes and a full stop (-.-) indicate that the sample size is too small to be used as a basis for estimating the corresponding values with acceptable reliability and precision. A dash (-) indicates that the amount is nil or negligible. A blank space in a table indicates that the concept under consideration is not applicable or not comparable. A minus sign (-) indicates a deficit or decrease, except where otherwise specified. The use of a hyphen (-) between years (e.g., 1990-1998) indicates reference to the complete number of calendar years involved, including the beginning and end years. A slash (/) between years (e.g., 2003/2005) indicates that the information given corresponds to one of these two years. The world “dollars” refers to United States dollars, unless otherwise specified. Individual figures and percentages in tables may not always add up to the corresponding total because of rounding. United Nations Publication )3". s )33. PRINTED VERSION % )3". ,#' 0 s 3ALES .O %))' Copyright © United Nations, July 2011. All rights reserved 0RINTED IN 3ANTIAGO #HILE s Applications for the right to reproduce this work are welcomed and should be sent to the Secretary of the Publications Board, United Nations Headquarters, New York, N.Y. 10017, U.S.A. Member States and their governmental institutions may reproduce this work without prior authorization, but are requested to mention the source and inform the United Nations of such reproduction. Foreign $IRECT )NVESTMENT IN ,ATIN !MERICA AND THE #ARIBBEAN s 3 Contents Summary and conclusions ............................................................................................................................................ 9 Chapter I Regional overview of foreign direct investment .................................................................................................. 25 A. Introduction .......................................................................................................................................................................... 25 B. Overview of foreign direct investment worldwide ............................................................................................................... 28 C. Foreign direct investment inflows and transnational companies in Latin America and the Caribbean ............................... 30 1. Trends and characteristics of foreign direct investment flows into Latin America and the Caribbean in 2010 ............................................................................................................................................ 30 2. Patterns of origin and destination of foreign direct investment and strategies of transnational companies in Latin America and the Caribbean ........................................................................................................... 38 3. Technology intensity and transnational companies’ involvement in research and development activities .................................................................................................................................................. D. Outward foreign direct investment and the trans-Latins ...................................................................................................... 1. Transnational companies from developing countries ................................................................................................... 2. Outward foreign direct investment: the Latin American and Caribbean region joins the dynamic developing countries ..................................................................................................................................................... E. Concluding remarks ............................................................................................................................................................. 55 Bibliography ............................................................................................................................................................................... Annex .......................................................................................................................................................................................... 59 Chapter II Central America, Panama and the Dominican Republic: export-oriented foreign direct investment .............................................................................................................................................. A. Introduction ......................................................................................................................................................................... B. Developments in FDI in the subregion: characteristics and main trends ............................................................................ 70 1. Growth in FDI since the 1980s ..................................................................................................................................... 72 2. Distribution of foreign direct investment by sector, 1999-2010 ................................................................................... 3. The impact of foreign direct investment on the export pattern ..................................................................................... 80 C. Current and new generation incentives for attracting investments and promoting exports ................................................. 82 1. Background ................................................................................................................................................................... 82 2. Changes in the incentive regime ................................................................................................................................... D. Conclusions .......................................................................................................................................................................... 87 Bibliography .............................................................................................................................................................................. 89 Annex .......................................................................................................................................................................................... 92 4 Economic Commission for Latin America and the Caribbean (ECLAC) Chapter III Direct investment by China in Latin America and the Caribbean ................................................................ 99 A. Introduction .......................................................................................................................................................................... 99 B. China’s growth, industrialization and international integration ........................................................................................... 100 1. Growth and export development ..................................................................................................................................