Panama and Honduras were the only two Central American countries to report increases in foreign direct investment in 2018 over the previous year, with year-on-year changes of 36% and 3%, respectively.
The growth of investments directed to Panama, which concentrated 51% of the sub-regional total, explained the increase that was reached in 2018 in Central America (9.4%), since except Panama and Honduras, the Central American countries received less Foreign Direct Investment (FDI) than in 2017, explains the report “Foreign Direct Investment in Latin America and the Caribbean 2019″, produced by the Economic Commission for Latin America and the Caribbean (ECLAC).
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From the ECLAC report:
Costa Rica was the second country with the highest investment (22% of the subregion’s total), which, although in the last three years failed to reach the peaks of the 2013-2015 period, maintained levels higher than those recorded in the decade of 2000, while also highlighted the medium-term growth of investments in El Salvador (despite the negative year-on-year variation), since between 2011 and 2016 had received an average of $319 million per year.
Since exceeding US$ 1 billion in 2004, foreign capital flows to Panama have shown an upward trend, with only four year-on-year falls (in 2007, 2009, 2012 and 2017). In 2018, they grew by 36.3% and totaled 6.578 billion dollars, which positioned the country as the fifth recipient of FDI from Latin America and the Caribbean.
A particularity observed in 2018 was the low weight of capital contributions (1% of the total), since most of the investments entered as reinvestment of profits (50%), which grew very slightly (4%). In this sense, similar to what was observed in Brazil or Mexico, inter-company loan inflows (which almost doubled) were the main factor behind growth.
The latest available sectorial figures are for 2017, showing the predominance of FDI in services, which reached 67% of the total, with the transport and telecommunications sector as the main receptor, followed by trade, hotels and restaurants, and thirdly financial services. There was also a growth in FDI in natural resources, which accounted for 30 per cent of income in that year.
Costa Rica has stood out as an attractive country for transnationals. In 2018, it received US$ 2.764 million in FDI, a figure slightly lower than in 2017 (-3.2%) but which enabled it to rank as the eighth receptor in Latin America and the Caribbean.