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Foreign direct investment reaches US$4,196 million in January

  • The inflow, which was up by 295% on January 2019, may have reflected the acquisition of companies announced in recent months.

In January, Chile received US$4,196 million in foreign direct investment (FDI), according to figures released this morning by the Central Bank of Chile. This represented an increase of 295% on January 2019 when the inflow reached US$1,062 million.

“Starting 2020 with this growth in investment is a clear sign that, for decades, Chile has forged a path of economic and political stability, maintaining the confidence of investors who look to the long term. The institutional path we have taken to solve the country’s challenges provides the certainty needed to continue investing in Chile. These are the figures for just one month but we will be working to maintain this growth going forward, with special emphasis on socially responsible and environmentally sustainable investments,” said the Minister of Economy, Economic Development and Tourism, Lucas Palacios.

“Despite the global turbulence, we have started the year with good news, with a sharp increase in the flow of FDI entering the country; this reaffirms the interest of overseas companies in investing in Chile. However, it is still too early to talk about the trend of FDI in Chile in 2020; we have to see how it evolves in the coming months,” said the director of InvestChile, Cristián Rodríguez.

The results for January may have been influenced by two specific operations: the acquisition of 20% of Latam Airlines by US airline Delta for some US$1,900 million and the materialization of the purchase of Chilquinta by China’s State Grid for an estimated US$2,300 million. This latter operation, because it is an operation between overseas investors, may have implied an outflow of FDI in February.

The most important component of the inflow in January was equity, which reached US$3,062 million, its highest level on record (2003). In the case of the other two components, reinvested earnings accounted for US$593 million and related borrowing for US$540 million.

Impact of coronavirus on FDI

Coronavirus will have a negative effect on foreign direct investment globally, according to a report released on Monday by the United Nations Conference on Trade and Development (UNCTAD). It estimates that it could cause a drop of between 5% and 15%. The impact would be concentrated in the most affected countries but, because of the negative shock to demand, particularly in economies such as China, would also affect the investment outlook in other countries.

“Foreign investment must be a priority amid the uncertainty the world is currently experiencing. One of our focuses as an agency is to foster reinvestment in the expansion of the operations of overseas companies already present in Chile. In the context in which we find ourselves, optimizing our resources and highlighting the opportunities Chile offers is paramount,” said Rodríguez.