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Regional FDI, growth expected to weaken next year

Bnamericas Published: Wednesday, November 30, 2022
Regional FDI, growth expected to weaken next year

While 2022 FDI in Latin America is expected to be higher than last year, the 2023 outlook is pessimistic amid global economic woes

"The fact that Latin America is geographically far from current conflict areas [like Ukraine] benefits the attraction of investment. However, for next year the perspective of a weaker global economy, also impacting commodity prices, will lead to a negative impact on investment flow," Luciano Rostagno, chief Latin America strategist at Banco Mizuho do Brasil, told BNamericas. 

In 2021, FDI totaled US$143bn, up 40.7% on 2020, according to the Economic Commission for Latin America and the Caribbean (Eclac). FDI went mainly to Brazil (33% of the total), Mexico (23%) and Chile (11%), followed by Colombia (7%), Peru (5%) and Argentina (5%).

Meanwhile, Standard & Poor's expects regional growth to slow to 0.7% in 2023, compared to 3.4% projected for 2022, as external and domestic demand weaken and tighter financial conditions squeeze investment.

In recent quarters, base rates were raised across the region to combat inflation. Standard & Poor's is projecting the start of an easing cycle in coming months. 

"We forecast that the cyclical shift to lower growth in the region, characterized by more moderate inflation, will lead to the start of interest rate-cutting cycles next year. In 2024, we expect growth in the region to return to its traditionally low rate of just over 2%," the rating agency said in a press release.

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