According to the latest CEPAL report, in 2020 the COVID-19 pandemic had a strong negative effect on investments by transnational companies. In Latin America and the Caribbean, this has been the reflection of a trend that dates back to 2015. Thus, after a year-one-year drop of 29% (USD 105.480 million) in 2020, the region has experienced historical lows in terms of Foreign Direct Investment (FDI) since 2005.
For Latin America and the Caribbean, this situation entails extraordinary challenges. The decrease in FDI leads to a decline, not only in its capacity for economic recovery, but also in its possibilities for productive diversification and development.
To face this situation, there is a need for transformative public policies that return to a path of equitable and sustainable recovery. In its report, CEPAL has identified eight sectors in which such efforts could be focused: the transition to renewable energies, sustainable electromobility in cities, the inclusive digital revolution, the health manufacturing industry, bioeconomy, the care economy, the circular economy and sustainable tourism. It is essential that the countries of the region implement plans to reactivate and transform their production, since the magnitude of this crisis is even greater than in the past.
On the other hand, taking into consideration China’s role in the region’s recovery, as one of the main investors in state-owned companies and infrastructure projects, CEPAL considers relevant that governments form Central and South America are committed to build a new framework of economic relations with the world power, as an opportunity for their future economic recovery.
Finally, for CEPAL it is essential to consider the current economic and social implications of the transition to a digitalized and hyper-connected world. To interpret and analyze the progress of the digital transformation, the report proposes a three-dimensional conceptual model: the connected economy, the digital economy and the digitized economy. These dimensions of digital development are constantly evolving: on the one hand, in a synergistic process in which advances in one sphere promote progress in the other; on the other hand, in a systemic process that transforms activities at the society level, the productive apparatus and the State. The digitization of the economy prompts a review of the existing regulatory and institutional frameworks.
To read the full report, visit: https://www.cepal.org/en/publications/47148-foreign-direct-investment-latin-america-and-caribbean-2021 .