FDI to and from Latin America and the Caribbean is expected to increase further in 2008. Inflows would be driven mainly by South America, where high commodity prices and strong subregional economic growth should continue to boost TNCs profits. However, the level of future inflows into Central America and the Caribbean is uncertain, as the slowdown of the United States economy and a weak dollar could adversely affect their export oriented manufacturing activities. Outflows are expected to be boosted by TNCs in Brazil and Mexico, which have already announced ambitious investment plans for 2008.
FDI to and from South-East
Europe and the Commonwealth of
Independent States maintained an
upward trend and set new records.
As in most other regions, inflows to and
from South-East Europe and the CIS reached
unprecedentedly high levels. Inward FDI rose for a
seventh consecutive year, to reach $86 billion - 50%
more than in 2006. In the CIS, these inflows were
mainly attracted to fast growing consumer markets
and natural resources, while those to South-East
Europe were associated with privatizations. Inward
FDI in the Russian Federation increased by 62%, to
$52 billion.
Outward FDI from South-East Europe and the
CIS amounted to $51 billion, more than double its 2006
level. FDI from the Russian Federation - the main
source country in the region - soared to $46 billion
in 2007. Russian TNCs have extended their reach to
Africa with the aim of increasing their raw material
supplies and their access to strategic commodities.
These are needed to support their efforts to increase
their downstream presence in the energy industry and
their value added production activities in the metals
industry of developed countries.
Whereas most of the national policy changes of
the transition economies in 2007 were in the direction
of greater openness to FDI, some CIS countries
continued to introduce restrictions in the extractive
industries and some other strategic industries. The
Russian Federation approved the long discussed
Strategic Sector Law, which specifies industries in
which foreign investors are allowed only minority
participation.
In Kazakhstan, a newly approved natural
resources law allows the Government to change
existing contracts unilaterally if they adversely affect
the country's economic interests in the oil, metal
and mineral industries. Nevertheless, FDI flows are
expected to be buoyant in these two countries as well
as Ukraine.
In developed countries FDI inflows and
outflows appear to have peaked.
Despite concerns over the economic uncertainty
faced by some developed economies, FDI inflows to
developed countries as a whole surged by 33% in
2007, to reach $1,248 - yet another record. The rise
was mainly driven by cross-border M&As, but also
by reinvested earnings as a result of high profitability
of foreign affiliates. The United States retained its
position as the world's largest FDI recipient country.
The restructuring and concentration process in the
enlarged common market of the EU countries led
to a renewed wave of cross border acquisitions.
Large FDI flows to the United Kingdom, France, the
Netherlands and Spain drove overall FDI inflows to
the EU to $804 billion - a 43% increase. Japan's FDI
inflows grew strongly for the first time since the end
of the 1990s.