- The contraction in investment particularly affected developed countries.
- Latin America was the developing region hardest hit by the investment health crisis.
- Asia was the continent that best weathered the storm.
Foreign direct investment, affected by the COVID-19 pandemic, plummeted 42% globally in 2020, the United Nations Conference for Trade and Development (UNCTAD) said on Sunday. UNCTAD indicated that the recovery from this indicator would be likely be delayed until 2022.
Foreign investments, which in 2019 had totaled $1.5 trillion, contracted to $859 billion, a figure 30% lower than the minimum that had been registered in 2009, with the global financial crisis.
For 2021, the agency maintains previous forecasts in which it predicted a fall in foreign investment of between 5% and 10%, the director of Companies and Investments of UNCTAD, James Zhan said.
The contraction in investment particularly affected developed countries, where it fell by 69% to its worst level in 25 years. In developing economies, the decline was only 12%.
This uneven trend meant that the percentage of investment in developing countries grew to reach 72% of the global total: $616 billion, the highest rate on record. By region, the European Union was one of the areas where the collapse was greatest, around 70%, reaching $110 billion.
Mr. Zhan elaborated that of the 27 economies of the EU, seventeen saw foreign investment fall, including Germany, Italy, Austria, and France. However, that of Sweden doubled, and that of Spain grew by 52%.
For the case of Spain, the expert indicated that the growth was due to several large acquisitions of Spanish companies by foreign rivals. An example was the purchase of 86% of the telephone company MásMóvil for $2.8 billion, in charge of a consortium formed by the US funds Providence, KKR, and Cinven.
Latin America Most Affected
Latin America was the developing region hardest hit by the investment health crisis, as this indicator fell 37% in 2020 to add $101 billion (€83 billion). According to Mr. Zhan, this was due to the region’s dependence on industries related to raw materials, already weakened in years before the pandemic
In Brazil, foreign investment fell by 46%. It fell by 76% in Peru (a country particularly affected by the paralysis of new capital flows in the mining sector), 49% in Colombia, 47% in Argentina, and 21% in Chile.
In the region, only Mexico registered a relatively low decline of 8%, thanks in part to earnings from reinvestments. However, the national auto industry was particularly hit, with a 44% drop in investments.
In Africa, the decline in investment was somewhat lower, 18%. Asia was the continent that best weathered the storm, with a drop of only 4% last year, which accounted for more than half of foreign investments ($476 billion).
China, one of the few large economies that grew in 2020 (2.3%), even saw its investment grow compared to 2019, 4% to $163 billion. This was due, among other factors, to the policies to support the entry of foreign capital approved after the confinements, which in that country lasted less than in other latitudes.
Investment in India also grew, by 17% to $57 billion, benefiting that country from the injection of capital into the digitized economy.
In the United States, the indicator fell by half (-49%), reaching $134 billion, affected by the fall in investments from important partners such as the United Kingdom, Germany and Japan.