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23/01/2018 - 07:00hs
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UNCTAD reports a decline in the flow of global investment

The 2017 performance frustrated the UN agency’s expectations, which was predicting a growth. There was a decline of 16%, to USD 1.52 trillion. However, the investment inflow to Brazil went up.



São Paulo – The global foreign direct investment (FDI) flows fell 16% last year over 2016, to USD 1.52 trillion, according to the UNCTAD Global Investment Trends Monitor released this Monday (22) by the United Nations Conference on Trade and Development (UNCTAD).

The 2016 data was revised to USD 1.81 trillion against a forecast of USD 1.71 trillion published by UNCTAD’s World Investment Report in June of last year. At the time, the UN agency expected a growth of 5% in the investment flow in 2017, which didn’t occur.

“The decline of global FDI flows is in stark contrast to other macroeconomic variables, such as GDP (Gross Domestic Product) and trade growth, which saw substantial improvements in 2017,” said James Zhan, director of UNCTAD’s Investment Division, in a statement.

UNCTAD says that the 2017 performance was impacted by a decline of 27% in FDI inflow in developed countries, especially Europe (-27%) and North America (-33%), with the United States and the United Kingdom standing out. Such declines, according to the agency, occurred after spikes in 2016, and meant a return to previous levels of inflows.

However, in developing nations, FDI inflows climbed 2% in 2017, to USD 653 billion, with an increase to countries in Asia, Latin America and the Caribbean, while remaining flat in Africa.

In the case of Latin America, investments totaled USD 143 billion, according to estimative by the UN Agency, up 3% over 2016. It’s the first inflow increase recorded in five years, but the volume is still below the level reached in 2012, the year that saw the peak in the price of commodities.

Brazil

UNCTAD says that the region’s economy grew moderately in 2017, after two years of recession, and investors started looking for opportunities again, especially in Brazil. “Nine of the ten largest acquisitions by foreign companies in the region were in Brazil, and seven involved a Chinese buyer,” said the agency.

The report shows that investments in Brazil climbed 4% in 2017, to USD 60 billion. The data differ from the one released by the country’s Central Bank in December. According to the BC, the FDI net inflow reached USD 65 billion from January to November of last year, an increase of 3.4% over the same period of 2016. The 2017 consolidated data has not yet been published by the BC.

In UNCTAD’s ranking, Brazil stands in the seventh position among the largest receivers of FDI last year, trailing only the United States, China, Hong Kong, Holland and Ireland, and tied with Australia.

Among the types of FDI, international mergers and acquisitions of companies dropped 23% in 2017, after three years of growth, to USD 666 billion. Even still, this is the third highest level ever recorded.

In the case of new projects, the decline was even steeper, 32%, to USD 571 billion, the lowest level since 2003. “If confirmed [the estimative], the drop in greenfield project announcements would be a negative indicator for the longer term,” said UNCTAD. The agency adds that it’s especially worrisome the reduction in almost by half of the value of projects announced in developing nations.

“While FDI in developing countries remained at a level similar to the previous year, more investment in sectors that can contribute to the Sustainable Development Goals (set up by UN to be reached until 2030) is still badly needed. Promoting FDI for sustainable development remains a challenge,” said UNCTAD Secretary-General Mukhisa Kituyi, in a statement.

Since the forecasts for the growth of the global economy, of trade and of the price of commodities in 2018 are more positive, UNCTAD assesses that these would normally indicate a potential growth of the FDI flow this year. The estimative points to USD 1.81 trillion, but “elevated geopolitical risks” and political uncertainties could frustrate the forecast. UNCTAD fears, for instance, that the “protectionist rhetoric” by authorities could become “trade restrictive actions.”

*Translated by Sérgio Kakitani

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