Foreign investment and the energy sector in Latin America. Analysis and economic impact

Las Oaxacas Wind Complex, 306 MW, Mexico. Photo courtesy of Acciona

Latin America has been a major attractor of foreign capital due, among other factors, to the presence of natural resources and the size and potential of its economies. Added to that is the relevance of the adoption of major structural reforms, promoted by the socalled Washington Consensus, which have led to the deregulation and privatisation of a wide range of economic and strategic sectors which were in the hands of state monopolies.

This resulted in a boom in the entry of foreign companies during the nineties and a growing importance of flows towards sectors such as finance, telecommunications and energy.

Flows of foreign direct investment (FDI) directed at Latin America have seen greater dynamism than average over the past two decades. In 2011 Latin America absorbed 7.5% of global FDI, equivalent to 28.3% of the region’s GDP. Brazil and Mexico have been the main recipients of foreign direct investment. Argentina, meanwhile, has been losing weight as a destination for multinationals, while Chile and Colombia have progressively increased their attractiveness to investors.

Article published in: FuturENERGY March 2014