Chile FDI climbs 176% in Q1 despite headwinds

Foreign direct investment in Chile rose 33.2% year-on-year in March to US$1.698bn despite fallout from the social crisis and the coronavirus pandemic.

Inward flows for the month bring the quarterly total to US$6.477bn, up 176% year-on-year, investment promotion agency InvestChile said in a release, citing central bank data.

The three-month figure is the second biggest for a first quarter since the current data series began in 2003, the agency said.

The first quarter saw two major operations, involving Latam Airlines and Delta Air Lines (US$1.9bn) and electricity distribution company Chilquinta and China State Grid (US$2.3bn). 

Welcoming the Q1 figures, Ian Frederick, chief of InvestChile’s investment promotion division, said foreign investment will play a key role in the country’s recovery and job creation following the health crisis.

“The scenario that we face is challenging for investment and at InvestChile we are working so that foreign companies can advance their projects or investment plans in our country when things normalize, with a special focus on those already established in Chile,” Frederick said.

Q1 FDI BREAKDOWN

Equity purchases accounted for the bulk of FDI in January-March, with US$3.530bn reported. Reinvestment of profits accounted for US$1.833bn, followed by debt instruments (US$1.114bn).

MARCH BREAKDOWN

Meanwhile in March, reinvestment of profits accounted for the biggest component of FDI, with US$886mn reported, followed by debt instruments (US$530mn) and equity purchases (US$282mn).

BACKDROP

Globally, coronavirus headwinds are expected to dent FDI, with the UN forecasting a plunge of up to 40% in 2020-21. Energy is forecast to be among the hardest hit.

In terms of gross fixed capital formation in Chile, in its latest monetary policy report the central bank forecasts this will drop 8.2% this year before growing 5.1% in 2021.