Venezuela: Lowest FDI Per GDP..Panama Highest

Written by Latin Business Chronicle

Monday, 04 August 2008

Latin Business Chronicle --While Venezuela ranked at the bottom of our FDI-GDP comparison, Panama ranked at the top, followed by Chile. Interestingly enough, Panama and Chile are ranked at the top of the Latin Business Index from Latin Business Chronicle, while Venezuela is ranked at the bottom. The index looks at five key categories and 27 subcategories to measure the recent, current and future business environment in a country.

Although Brazil and Mexico dominate foreign direct investment in Latin America, measured as a percent of their economies, they are both laggards - ranking below the average for the region. The total FDI of $105.9 billion to the region last year represented 3.1 percent of its 2007 GDP of $3.4 trillion.

Foreign direct investment in Panama last year reached $1.8 billion, which was actually a decline of 29 percent from 2006. However, even the new figure produced favorable results. It represents 9.1 percent of Panama's GDP of $19.7 billion. FDI in Chile reached $14.5 billion last year, nearly double the rate of 2006. That represented 8.9 percent of Chile's GDP last year of $163.8 billion.

CENTRAL AMERICAN CHAMPIONS

FDI in El Salvador exploded last year - going from $219 million in 2006 to $1.5 billion last year. As a result, El Salvador now has Latin America's third-highest FDI per GDP. Its FDI represents 7.4 percent of the country's GDP of $20.4 billion. Costa Rica - another Central American nation - also did well. Its FDI represents 7.3 percent of its GDP of $26.2 billion. FDI to Costa Rica reached $1.9 billion last year, a 29 percent increase.

Honduras and Nicaragua came in fifth an sixth place on the FDI-GDP ranking, thanks to percentages of 6.5 and 5.3, respectively. It should be noted, however, that both countries have small economies. Honduras ranks as the fourth- and second-smallest economies in Latin America, respectively.

Also Colombia and Peru - two countries with investor-friendly governments - did well. Colombia's FDI as a percent of its GDP of $171.6 billion represents 5.2 percent. FDI in Colombia grew by 40 percent last year to $9.0 billion. FDI in Peru represented 4.9 percent of its GDP of $109.1 billion last year. FDI reached $1.9 billion last year, a 54 percent increase from 2006.

The Dominican Republic also did well. It boosted foreign direct investment last year by 16 percent to $1.7 billion. That represents 4.7 percent of its 2007 GDP of $36.4 billion. Meanwhile, Uruguay also managed to boast an FDI rate that was higher than the average despite a FDI decline of 37 percent last year to $879 million. (The decline was mainly due to an exceptionally high investment in 2006 - by Finland-based Botnia.) Uruguay's FDI represented 3.9 percent of its 2007 GDP of $23.0 billion.

BRAZIL AND MEXICO

Although Brazil garnered Latin America's highest FDI last year - $34.6 billion - it also has the region's largest economy. So measured as a percent of its 2007 GDP of $1.3 trillion, FDI only accounted for 2.6 percent. The same applies to Mexico. Its FDI of $23.2 billion last year also represented 2.6 percent of its 2007 GDP of $893.4 billion. The low ranking on our FDI-GDP comparison comes despite impressive FDI growth last year. Brazil's FDI increased by 84 percent, while that of Mexico grew by 21 percent.

A similar trend is seen with Argentina, Latin America's third-largest economy, and Guatemala, Central America's largest economy. FDI in Argentina only accounted for 2.2 percent of its GDP last year. FDI reached a total of $5.7 billion last year, an increase of 14 percent from 2006. That compares to its GDP of $260.0 billion. In Guatemala, FDI only accounted for 1.5 percent of its GDP of $33.7 billion last year despite growing by 51 percent to $182 million.

Bolivia's FDI-GDP ratio is also only 1.5 percent. Its FDI of $164 million last year (a decline of 41 percent) compares to its 2007 GDP of $13.2 billion.

Only three countries had an FDI-GDP ratio that was lower than one percent - Paraguay, Ecuador and Venezuela. Paraguay's FDI of $142 million last year represented 0.9 percent of its 2007 GDP of $10.9 billion, while Ecuador's FDI of $179 million last year was the equivalent of 0.5 percent of its 2007 GDP of $44.2 billion.

Like Chavez, Ecuador's president Rafael Correa is attempting to create 21st century socialism in his country. So far, he seems to be doing well, mimicking Chavez' success in scaring off foreign investors.

LATIN AMERICA'S FDI-GDP RANKING

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RankCountryFDIGDP%
1 Panama $1,825 $19,740 9.1%
2 Chile $14,457 $163,792 8.9%
3 El Salvador $1,526 $20,373 7.4%
4 Costa Rica $1,889 $26,238 7.3%
5 Honduras $816 $12,279 6.5%
6 Nicaragua $335 $5,723 5.3%
7 Colombia $9,028 $171,607 5.2%
8 Peru $5,343 $109,069 4.9%
9 Dom. Rep. $1,698 $36,396 4.7%
10 Uruguay $879 $22,951 3.9%
11 Brazil $34,585 $1,313,590 2.6%
12 Mexico $23,230 $893,365 2.6%
13 Argentina $5,720 $259,999 2.2%
14 Bolivia $164 $13,192 1.5%
15 Guatemala $536 $33,694 1.5%
16 Paraguay $1,526 $10,870 0.9%
17 Ecuador $179 $44,184 0.5%
18 Venezuela $646 $236,390 0.3%
         
Tot/av LatAm/Caribb. $105,925 $3,449,900 3.1%