Friday, July 05, 2013

Foreign direct investment: Its impact in the Chilean economy

Foreign Direct Investment has been an important source for economic growth in Latin America and other countries in the world. Whether it is in services, banking, mining, information technologies, manufacturing, retail or transportation, FDI have important advantages such as the access to new technologies, new management models, “know how” for productive process , and a better approach to R&D in private firms. Some Latin America countries, have made huge progress in the competitiveness index, because of foreign investment in new technologies (Costa Rica),or financial services (Chile).- The implications of FDI are wide and relevant. A recent research done by the Chilean Ministry of Economy concerning the impact of FDI in the economy ,got interesting results: a.- Firms with foreign investor participation ,pay wages 130% higher than their national counterparts.- b.- 15% of higher employment rate between 2009-2011 , was because of FDI incoming flows c.- 18% of GDP increases and 30% of investment (2009-2011),was because of FDI flows into the Chilean economy ( due to the global financial recession, the Chilean economy GDP growth was -1% in 2009, and 3,6% on average in that period).- So , It is in the best interest of domestic economies to support policies and the institutional framework aimed at keeping the incentive to invest in Emerging economies . FDI is link to more and better business opportunities, higher employment and welfare increases.- The expectations in Chile is for further FDI flows in the near future. The average GDP growth expectation of 4,5-5% for the next years ,imply a strong incentives for investment opportunities in energy (the environment protection requirements should definitively be clarified soon) , infrastructure, private health, and banking sector. In Latin America, there also good opportunities in those economies whose GDP expectation is on the rise, such as those ones working out the transpacific partnership agreement .