With foreign direct investment (FDI) flows to Latin America and the Caribbean expected to plummet by 40–50% in 2020, as forecast by the United Nations Conference on Trade and Development (UNCTAD), Chile appears to have found a way to keep investment flowing into the country.
According to preliminary figures from the Central Bank of Chile, the country received a total of $10.2bn in FDI during the first eight months of 2020.
During the first half of the year, FDI flows to Latin America ebbed by 25%, the Investment Trends Monitor report by UNCTAD shows. However, Chile and Mexico are the only countries still seeing investment increases.
Chile’s rise in FDI was 11% when compared with the first eight months of 2019, when inflows reached $9.1bn.
It was also 31% up on the average for the past five years and 12% up on the average for the period since comparable records began (2003–20), according to InvestChile, the country’s investment promotion agency.
According to the Investment Trends Monitor report, the rise in flows was driven by investments in transport, manufacturing and trade industries, including the acquisition of a 20% stake in Chilean airline Latam by US carrier Delta Airlines for $1.9bn, which was finalised at the end of 2019.
Impact of politics on FDI flows into Chile
Chile ranks 59th in the World Bank’s Doing Business 2020 report, and the country made global headlines when an overwhelming majority of 78% of voters backed a referendum on 25 October in favour of rewriting the country’s constitution, which would wipe away the last few traces of the military dictatorship of Augusto Pinochet.
The government’s agreement to submit the rewriting of the constitution to a vote came as a result of protests in October 2019, which caused FDI flows into the country to plummet during the final quarter of 2019. However, flows into the country during 2019 did increase by 63% regardless, to $11bn.
On a regional basis, at the beginning of October the region of Biobío signed a collaboration agreement with InvestChile to promote FDI in the region.
InvestChile acting director Juan Araya highlighted in a press release that the agreement showed the importance of investment flows reaching different regions in the country since “when we talk about foreign investment, we are talking about job creation, better labour practices, more sustainable projects, more technology and opportunities for SME suppliers”.
In 2014, Chile’s government launched the Initiative of Productivity, Innovation and Growth, stressing how the country would prioritise investment in five economic sectors: mining industry services, the sophisticated food industry, exportable technological services, sustainable tourism, and energy/logistics infrastructure for development.