a Excluding tax-heaven economies

Mexico’s FDI inflows, while down from 1997, were above 1995 and 1996 levels and this report suggests that Mexico will continue to be an important magnet for manufacturing investment from United States TNCs, also as a result of the North American Free Trade Agreement (NAFTA).

Recent FDI inflows into Argentina (as into Brazil, Paraguay and Uruguay) have been influenced by the extension of the country’s market into the larger MERCOSUR area. While the overall FDI volume in 1998 into Argentina declined, it was close to the annual average seen from 1994-1997. The fall back may reflect the slowing of the privatization process.

Privatizations have been a key factor in inflows to Venezuela and Colombia in recent years. These two countries received lower inflows in 1998 but the levels registered still remain much above their 1994-1996 average (estimated at about US$1.8 billion for Colombia, and at about US$1.3 billion for Venezuela).

FDI outflows from Latin American and Caribbean countries continued to be strong at US$15 billion last year, about the same level as was reached in 1997, and twice that registered during 1994-1996. But a key distinction needs to be made between outflows from offshore financial centres, which amounted to about US$5 billion, and those that originate in other countries. The latter kind reflects a growing trend of TNCs from the region investing in neighbouring countries – a trend which is particularly noteworthy0 within MERCOSUR. This wave of Latin American FDI has been led by firms mainly from Argentina, Chile, Mexico and to a lesser extent Brazil. Assets abroad by firms headquartered in these countries can be estimated between US$40 and US$50 billions.

WIR99 also notes that: "In an overall turbulent year for financial movements, inflows into offshore financial centres such as Bahamas, Bermuda and Cayman Islands increased in 1998, representing about half of total inflows into Central America and the Caribbean (excluding Mexico)".

Meanwhile, several of the smaller economies (non-financial centres) in the Caribbean and in Central America secured substantial FDI gains last year. Privatizations in the services sector stimulated inflows into El Salvador and Guatemala, while privatizations and more traditional investment in export-oriented assembly manufacturing activities, stimulated FDI inflow gains for Costa Rica, Dominican Republic and Jamaica.

UNCTAD’s top 50 developing country TNC list contains numerous corporations from Latin America (the leading ones are ranked below). This year, Petróleos de Venezuela moved ahead of Daewoo Corporation to claim first place on UNCTAD’s 1999 list of the 50 largest TNCs from developing countries measured in terms of foreign assets. The only other corporation from the region to make the top 10 was Cemex of Mexico in fifth place.

The top 10 TNCs based in Latin America, ranked by foreign assets, 1997
(Assets and sales in billions of U.S. dollars)

Data based on 1997 published results.

• • unpublished UNCTAD estimates.

1.  Foreign direct investment is defined as an investment involving management control of a resident entity in one economy by an enterprise resident in another economy. FDI involves a long-term relationship reflecting an investor’s lasting interest in a foreign entity.

2. Transnational corporations comprise parent enterprises and their foreign affiliates: a parent enterprise is defined as one that controls assets of another entity or entities in a country or countries other than its home country, usually by owning a capital stake. An equity capital stake of at least 10 per cent is normally considered as a threshold for the control of assets in this context.

3. The World Investment Report, 1999 (Sales No. E.99.11.D.3, ISBN 92-1-112440-9) may be obtained at the price of US$49, and at a special price of US$19 for customers in developing countries, from United Nations Publications, Sales Section, Palais des Nations, CH-1211 Geneva 10, Switzerland, fax: +41 22 917 0027, e-mail: unpubli@un.org, Internet: http://www.un.org/publications; or from United Nations Publications, Two UN Plaza, Room DC2-853, Dept. PRES, New York, N.Y. 10017, USA; telephone: +1 212 963 83 02 or +1 800 253 96 46, fax: +1 212 963 34 89, e-mail: publications.un.org