Lima, June 26, 2021.- Foreign direct investment, which dropped by 35% in 2020 due to the COVID-19 pandemic, will grow between 10% and 15% this year; however, it is not expected that the levels prior to the health crisis will be reached until 2022, specifies a United Nations report.
The study prepared by the United Nations Conference on Trade and Development (UNCTAD), which updates another study issued last January, slightly reduces the impact of the pandemic on investments (back then, it stated that investments had dropped by 42% in 2020) and increases its growth forecasts for 2021 by about five points.
Last year, foreign direct investment in the world totaled one trillion dollars, a third less than the trillion and a half in 2019, the year in which the indicator had slightly recovered after three years of declines.
“Investment drop to levels up to 20% lower than the worst recorded in the financial crisis of more than a decade,” stated the acting Secretary General of UNCTAD, Isabelle Durant, who will soon be replaced by Costa Rican Rebeca Grynspan, when presenting the report.
The lockdowns and other containment measures in the pandemic slowed down existing investment projects, while the prospect of a recession prompted multinationals to reassess new projects, specified the report.
The drop in foreign investment had more emphasis (58%) in developed countries, especially in Europe, where the drop was 80%, while in North America such drop attained 40%.
Latin America, the worst-hit developing region
In developing regions, the most affected region was Latin America, with a 45% drop in foreign investment, while in Africa such drop was 16%, while Asia was the only exception in this world trend, since said indicator increased by 4%.
Supported by the lesser impact of the pandemic in Asian countries in 2020, the region became an attractive place for investors and received half of the world’s investment flows in the past year, UNCTAD emphasized.
By countries, the United States was the one that attracted the most investment in 2020 (US$ 156,000 million), although China, in second place, bridged the gap and received foreign capital injections amounting to US$ 149,000 million.
Hong Kong is in the third place (Chinese territory which is independent at economic and commercial levels), with investments amounting to US$ 119,000 million, and two other Asian economies, Singapore and India, which were located in the fourth and fifth place, US$ 91,000 and US$ 64,000 million, respectively.
It also emphasizes that growth forecasts in 2021 and 2022 are still uncertain, as they will depend on factors such as possible new waves of the pandemic, the possible impact of state economic recovery plans on investment or political lobbying.
This uncertainty “reflects the persistent doubts about access to vaccines, the onset of virus mutations and the reopening of economic sectors,” states the UNCTAD.
The agency also envisions that the recovery will be very uneven, with a sound increase in foreign investment in developed economies (supported by the injection of large-scale public funds) and in Asia, but more uncertain in regions such as Latin America or Africa.
The report emphasizes the deep drop in foreign investment in vital sectors to achieve the United Nations sustainable development goals, since in all of them there were double-digits drops, except in renewable energies, which dropped by only 8 %.
Specifically, the drop in foreign investment in infrastructure dropped by 54%, investment in water and sanitation dropped by 67%, investment in hospitals and other health equipment dropped by 54%, investment in food and agriculture dropped by 49%, and investment in education dropped by 35%.
“Companies and financial groups are still cautious with new investments in productive assets and infrastructure,” concludes the representative of the UNCTAD.