Foreign investment in Latin America and the Caribbean, 2001 3 2002 Foreign investment in Latin America and the Caribbean 2 ECLAC Foreign Investment in Latin America and the Caribbean, 2002 Report is the latest edition of a series published annually by the ECLAC Unit on Investment and Corporate Strategies. It was prepared by Alvaro Calderón, Graciela Moguillansky, Nicole Moussa, Michael Mortimore and Rogerio Studart, with assistance from Sebastián Vergara and a special contribution from Fernando J. Cardim de Carvalho (consultant) in chapter III. The statistical data were compiled and processed by Francisca Opitz, Patricio Valenzuela and Pablo Carvallo. The Information Centre of the Unit on Investment and Corporate Strategies served as the primary source of quantitative data. The development of this Information Centre has provided the Unit with ready access to statistical information and other types of data from a number of international organizations, including the International Monetary Fund, the Statistical Office of the European Communities and the United Nations Conference on Trade and Development, as well as a host of national institutions such as central banks and investment promotion agencies for Latin America and the Caribbean. Any comments or suggestions regarding this publication should be directed to Michael Mortimore (e-mail: [email protected] ). Notes and explanation of symbols The following symbols have been used in the tables in this study: Three dots (...) indicate that data are not available or are not separately reported. A minus sign (-) indicates a deficit or decrease, unless otherwise indicated. A full stop (.) is used to indicate decimals. Use of a hyphen (-) between years, e.g., 1960-1970, signifies an annual average for the calendar years involved, including the beginning and the end years. The word “dollars” refers to United States dollars, unless otherwise specified. Figures and percentages in tables may not neccessarily add up to the corresponding totals, because of rounding. 4 ECLAC LC/G.2198-P April 2003 Copyright © United Nations 2003 All rights reserved Printed in Chile Applications for the right to reproduce this work are welcomed and should be sent to the Secretary of the Publication 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. UNITED NATIONS PUBLICATIONS Sales No: E.03.II.G.11 ISSN printed version 1680-8649 ISSN online version 1681-0287 ISBN 92-1-121382-7 Foreign investment in Latin America and the Caribbean, 2001 5 CONTENTS Page ABSTRACT ..................................................................................................................................... 9 SUMMARY AND CONCLUSIONS .............................................................................................................. 11 I. REGIONAL OVERVIEW ............................................................................................................... 19 A. RECENT TRENDS IN FOREIGN DIRECT INVESTMENT IN LATIN AMERICA AND THE CARIBBEAN ....................................................................... 19 1. Foreign direct investment worldwide ......................................................................... 20 2. Foreign direct investment in Latin America and the Caribbean: recent inflows and trends ....................................................................................................... 23 B. FDI STRATEGIES, AGENTS AND MODALITIES .............................................................. 35 1. TNC strategies in Latin America ................................................................................. 35 2. Foreign investment modalities in Latin America and the Caribbean ........................ 44 3. Conclusion .................................................................................................................. 45 Annex ..................................................................................................................................... 47 Appendix ..................................................................................................................................... 55 II. THE ANDEAN COMMUNITY: FOREIGN DIRECT INVESTMENT AND CORPORATE STRATEGIES ................................................................................................................................. 57 A. FOREIGN CAPITAL IN THE ANDEAN COMMUNITY ..................................................... 58 1. The treatment of foreign capital in the member countries of the Andean Community ................................................................................................................. 58 2. Recent trends in FDI in the Andean Community ....................................................... 62 B. STRATEGIES USED BY TRANSNATIONAL CORPORATIONS IN THE ANDEAN COMMUNITY ....................................................................................... 67 1. Seeking natural resources for export .......................................................................... 67 2. Access to local services and infrastructure markets ................................................... 78 C. CONCLUSIONS ................................................................................................................... 89 Annex ..................................................................................................................................... 91 III. INTERNATIONAL BANKS IN LATIN AMERICA: CORPORATE STRATEGIES AND REGIONAL IMPACT .................................................................................... 103 INTRODUCTION ........................................................................................................................... 103 A. THE LATIN AMERICAN BANKING SECTOR: STRUCTURAL PROBLEMS, CRISES AND RESTRUCTURING ....................................................................................... 104 1. Structural characteristics and problems of banking systems prior to the 1990s ..................................................................................................................... 105 B. UNIVERSALIZATION AND GLOBALIZATION: DETERMINANTS OF THE STRUGGLE FOR NEW MARKETS ........................................................................... 110 1. New trends in the international banking market ........................................................ 110 2. The development of new financial instruments ......................................................... 112 3. The banks' strategies for responding to change ......................................................... 114 6 ECLAC Page C. CORPORATE STRATEGIES IN LATIN AMERICA ........................................................... 120 1. Strategy for penetrating the Latin American market .................................................. 122 2. Corporate strategies, market share and profitability .................................................. 123 3. Costs and benefits of expansion in Latin America ..................................................... 129 D. FOREIGN BANKS: MICROECONOMIC EFFICIENCY VERSUS MACROECONOMIC EFFECTIVENESS ............................................................................ 131 1. Microeconomic efficiency .......................................................................................... 131 2. Macroeconomic impact ............................................................................................... 137 E. CONCLUSIONS ................................................................................................................... 143 Annex ..................................................................................................................................... 145 BIBLIOGRAPHY ..................................................................................................................................... 153 TABLES, FIGURES AND BOXES Table I.1 Regional distribution of net inward foreign direct investment, 1996-2002 ............ 20 Table I.2 Mexico, Central America and the Caribbean: net inward foreign direct investment by country, 1990-2002 ............................................................................ 25 Table I.3 South America: net inward foreign direct investment, 1990-2002 ........................... 29 Table I.4 Brazil: sectoral distribution of foreign direct investment, 1996-2002 ..................... 30 Table I.5 Argentina: foreign public utility firms that declared suspensions of payments in 2002 ....................................................................................................... 33 Table 1.6 Income sent abroad by foreign firms in Argentina, by sector, 1992-2001 ................ 33 Table I.7 Latin America: main brewery groups ......................................................................... 40 Table I.8 Latin America: main acquisitions in the brewery sector ........................................... 41 Table I.9 Latin America and the Caribbean: privatizations by sector and amount, 2002 ....... 44 Table II.1 FDI flows to the Andean Community countries, by destination, 1990-2002 ........... 62 Table II.2 Member countries of the Andean Community: cumulative FDI flows, by economic sector, 1992-2001 ...................................................................................... 64 Table II.3 Andean Community: cumulative