Foreign Investment in Latin America and the Caribbean 2003

In 2003, flows of foreign direct investment (FDI) to Latin America and the Caribbean continued to shrink for the fourth year running. With this latest decline, Latin America and the Caribbean turned in the worst performance of any world region. This situation was exacerbated by the steady increase in profit remittances and in outflows of other FDI-related resources, which has diminished its impact on the balance of payments. The decrease in FDI inflows over the past few years has varied across subregions and countries in Latin America and the Caribbean, however. In Mexico and the Caribbean basin, inflows have diminished less, while South America has been more strongly affected. Within South America, inflows were quite stable in the Andean Community but were down sharply in MERCOSUR and particularly so in Brazil. This publication devotes special attention to the strategies employed by transnational corporations seeking to heighten their efficiency with a view to moving into new markets. Accordingly, one chapter is devoted to an examination of FDI trends in Latin America and the Caribbean, while the other two deal with different aspects of this kind of corporate strategy. One analyses events in Costa Rica, the Dominican Republic, Honduras and Jamaica, which are regarded as cost centres for labour-intensive activities producing low value-added goods, while the other looks at the challenges facing the Brazilian and Mexican automotive industry production chain with regard to upgrading to manufacturing centres.