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Foreign Investment in Latin America, Caribbean rises in 2024
Foreign Investment in Latin America, Caribbean rises in 2024

UPI

time17-07-2025

  • Business
  • UPI

Foreign Investment in Latin America, Caribbean rises in 2024

The town of Sierra Grande in, southern Argentina was home to Latin America's largest iron ore mine, but its closure in 1991 turned it into a ghost town. Today, its 12,000 inhabitants see hopes reborn, thanks to two multimillion-dollar projects that could turn it into a new oil mecca. File Photo by Juan Macri/EPA July 17 (UPI) -- Foreign direct investment in Latin America and the Caribbean rose 7.1% in 2024, reaching nearly $189 billion, the United Nations Economic Commission for Latin America and the Caribbean reported Thursday. The increase came despite global economic uncertainty and an overall decline in investment flows worldwide. Brazil and Mexico accounted for 61% of the total, helping offset declines in Colombia, Chile and Argentina. Investment also rose in Central America and the Caribbean, particularly in the manufacturing and communications sectors. "Much of the increase is due to reinvested earnings from companies already operating in the region rather than new capital inflows," said José Manuel Salazar-Xirinachs, a Costa Rican economist and public policy expert. Equity contributions -- the component that reflects new investments -- are at their second-lowest level since 2010. Globally, foreign direct investment dropped 11% in 2024 when excluding transactions in European financial centers, a decline attributed to rising geopolitical tensions, trade disputes and the restructuring of global value chains. "Higher levels of conflict and heightened uncertainty are holding back investment decisions worldwide or at least are a deterrent," said Salazar-Xirinachs, who is executive secretary of the U.N. Economic Commission for Latin America and the Caribbean. Despite the global slowdown, announced foreign direct investment projects in the region surged 40% to a record $168 billion, driven by major hydrocarbon developments in Argentina, Mexico and Guyana. These included liquefied natural gas and oil megaprojects. Unlike global trends, which prioritize renewable energy and semiconductors, Latin America's investment announcements were dominated by fossil fuels. Renewable energy projects ranked second, but their value declined 13% from the previous year. Marco Llinás Vargas of the economic commission noted concern over the region's heavy reliance on extractive industries. He said the drop in technology-intensive investment is troubling and emphasized the need for more diverse and advanced forms of investment that can contribute to long-term productive development. The report identified critical minerals -- such as lithium, copper and rare earth elements -- as a strategic opportunity for the region. Chile alone holds more than 30% of the world's lithium reserves, but production and value-added exports remain limited. "Reserves don't automatically translate into production or economic benefit," said Martín Abeles, head of the commission's Natural Resources Division. There is a lack of technical, regulatory and institutional capacity to turn potential into performance. From 2005 to 2024, just 21% of global mining foreign direct investment targeted Latin America. While lithium investments have increased -- particularly in Argentina -- other minerals have not seen similar momentum. The United States strengthened its position as the leading investor in the region, accounting for 38% of the investment in 2024. The EU's share -- excluding Luxembourg and the Netherlands -- fell to 15% of the regional total, its lowest level since 2012. Investment from Latin America and the Caribbean made up 12% of foreign direct investment inflows, making it the third-largest source. Chinese investment accounted for just 2% of total inflows in 2024. Abeles called for stronger policy alignment, citing countries like Australia and Canada that tie investment to local supplier development, technology transfer and environmental governance. Digital transformation was also highlighted as a crucial development path. While foreign investment in telecommunications and data centers has grown, the region attracts only 7% of global digital investment. Foreign direct investment can be a catalyst for digital transformation, Salazar-Xirinachs said, but only if matched by absorptive capacity and infrastructure. Brazil and Mexico led the region in digital investment, followed by Argentina, Chile and Colombia. The commission recommended improving institutional coordination and investing in digital workforce development. Despite progress, the report noted that Latin America and the Caribbean continue to face persistent challenges in attracting new investors. The commission urged governments to treat foreign direct investment as part of broader productive development strategies. The report outlines 10 policy guidelines aimed at strengthening technical, operational, political and strategic capacities to attract and retain high-impact investment. Attracting foreign investment must go hand-in-hand with broader development policies, Salazar-Xirinachs said. It's not just about the amount of investment, but its quality and impact.

Remittance tax could shave half point off GDP in some Latin American nations
Remittance tax could shave half point off GDP in some Latin American nations

Yahoo

time29-05-2025

  • Business
  • Yahoo

Remittance tax could shave half point off GDP in some Latin American nations

ASUNCIÓN, Paraguay, May 29 (UPI) -- A proposed 3.5% tax on remittances from the United States could cost some Latin American countries up to half a percentage point of gross domestic product, sparking concern in nations where money sent to families back home account for a significant portion of economic output. On May 22, the U.S. House of Representatives narrowly passed a budget bill 215-214 that includes a 3.5% tax on remittances sent by non-U.S. citizens. The bill still needs approval from the Senate. A vote has not yet been scheduled, but lawmakers are expected to move forward in the coming weeks with a goal of passing the bill before the July 4 recess. The measure is part of President Donald Trump's proposed fiscal package known as the "Big Beautiful Bill" and would particularly affect countries like Nicaragua, Honduras, El Salvador, Guatemala, Haiti and Jamaica, where remittances account for between 17.9% and 27.2% of GDP, according to the U.N. Economic Commission for Latin America and the Caribbean. Remittances are not only a vital source of foreign currency for these countries, but they also play a critical role in sustaining local economies, especially in rural and low-income communities. While the commission emphasizes that remittances do not resolve structural poverty, they serve as a financial lifeline for many families. Remittances improve quality of life and provide access to essential goods and services. José Manuel Salazar-Xirinachs, executive secretary of the Economic Commission for Latin America and the Caribbean, said a remittance tax could reduce the amount those families receive or even discourage people from sending money altogether. "The Inter-American Development Bank estimates that remittances reduce poverty by up to 5.8% in El Salvador and by 0.8% in Mexico. Put another way, poverty in these countries would be higher without remittances," Salazar-Xirinachs said. In a country like Guatemala, which relies heavily on remittances from the United States, a 3.5% tax on those transfers could have multiple effects. One likely consequence is a negative impact on the balance of payments, which runs a yearly deficit and is offset in part by remittance inflows, Guatemalan economist Juan Roberto Hernández said. A drop in the supply of dollars could also put pressure on the exchange rate and make imports of food, medicine and fuel more expensive. This would likely be accompanied by a decline in consumption and investment. In 2024, Guatemala received $21 billion in remittances, representing about 20% of its GDP. The Inter-American Development Bank estimates that between 70% and 80% of remittances go toward basic needs such as food, housing, health and education. "Any decline would likely contract domestic demand and hurt key sectors like retail and services, with consequences for tax revenues and overall growth," Hernández said. In Mexico, although remittances represent a smaller share of GDP, the country receives the highest volume in the region -- $65.2 billion in 2024. Thousands of families could see their incomes reduced if the 3.5% tax takes effect, Salazar-Xirinachs said. A study by the Center for Latin American Monetary Studies found that about 11% of Mexican households received remittances between July 2023 and August 2024. Those households received an average of $549 per adult recipient each month, a significant amount considering the country's minimum wage is about $450 per month. Remittances from the United States to Latin America totaled an estimated $160.9 billion in 2024, a record for the region. However, while the total volume increased, growth slowed to just 5% -- the lowest rate in a decade due to limited labor mobility and slower job growth among migrant populations. The Trump administration estimates that a 3.5% remittance tax would generate $22 billion between 2026 and 2034, an annual average of $2.7 billion, or roughly 0.01% of U.S. GDP and 0.03% of federal spending. However, experts warn that revenue may fall significantly as senders shift to alternative transfer methods, including cryptocurrencies. Still, recipient families would most likely feel the impact through reduced remittance amounts or higher transfer costs, according to the U.N. economic commission.

Remittance tax could shave half point off GDP in some Latin American nations
Remittance tax could shave half point off GDP in some Latin American nations

UPI

time29-05-2025

  • Business
  • UPI

Remittance tax could shave half point off GDP in some Latin American nations

A 3.5% tax on money sent by people in the United States to relatives in other countries, including Latin America, would have a major impact on some of these nations' economies. Photo by RDNE Stock Project/ Pexels ASUNCIÓN, Paraguay, May 29 (UPI) -- A proposed 3.5% tax on remittances from the United States could cost some Latin American countries up to half a percentage point of gross domestic product, sparking concern in nations where money sent to families back home account for a significant portion of economic output. On May 22, the U.S. House of Representatives narrowly passed a budget bill 215-214 that includes a 3.5% tax on remittances sent by non-U.S. citizens. The bill still needs approval from the Senate. A vote has not yet been scheduled, but lawmakers are expected to move forward in the coming weeks with a goal of passing the bill before the July 4 recess. The measure is part of President Donald Trump's proposed fiscal package known as the "Big Beautiful Bill" and would particularly affect countries like Nicaragua, Honduras, El Salvador, Guatemala, Haiti and Jamaica, where remittances account for between 17.9% and 27.2% of GDP, according to the U.N. Economic Commission for Latin America and the Caribbean. Remittances are not only a vital source of foreign currency for these countries, but they also play a critical role in sustaining local economies, especially in rural and low-income communities. Related How Donald Trump can short sell Mexico to become president While the commission emphasizes that remittances do not resolve structural poverty, they serve as a financial lifeline for many families. Remittances improve quality of life and provide access to essential goods and services. José Manuel Salazar-Xirinachs, executive secretary of the Economic Commission for Latin America and the Caribbean, said a remittance tax could reduce the amount those families receive or even discourage people from sending money altogether. "The Inter-American Development Bank estimates that remittances reduce poverty by up to 5.8% in El Salvador and by 0.8% in Mexico. Put another way, poverty in these countries would be higher without remittances," Salazar-Xirinachs said. In a country like Guatemala, which relies heavily on remittances from the United States, a 3.5% tax on those transfers could have multiple effects. One likely consequence is a negative impact on the balance of payments, which runs a yearly deficit and is offset in part by remittance inflows, Guatemalan economist Juan Roberto Hernández said. A drop in the supply of dollars could also put pressure on the exchange rate and make imports of food, medicine and fuel more expensive. This would likely be accompanied by a decline in consumption and investment. In 2024, Guatemala received $21 billion in remittances, representing about 20% of its GDP. The Inter-American Development Bank estimates that between 70% and 80% of remittances go toward basic needs such as food, housing, health and education. "Any decline would likely contract domestic demand and hurt key sectors like retail and services, with consequences for tax revenues and overall growth," Hernández said. In Mexico, although remittances represent a smaller share of GDP, the country receives the highest volume in the region -- $65.2 billion in 2024. Thousands of families could see their incomes reduced if the 3.5% tax takes effect, Salazar-Xirinachs said. A study by the Center for Latin American Monetary Studies found that about 11% of Mexican households received remittances between July 2023 and August 2024. Those households received an average of $549 per adult recipient each month, a significant amount considering the country's minimum wage is about $450 per month. Remittances from the United States to Latin America totaled an estimated $160.9 billion in 2024, a record for the region. However, while the total volume increased, growth slowed to just 5% -- the lowest rate in a decade due to limited labor mobility and slower job growth among migrant populations. The Trump administration estimates that a 3.5% remittance tax would generate $22 billion between 2026 and 2034, an annual average of $2.7 billion, or roughly 0.01% of U.S. GDP and 0.03% of federal spending. However, experts warn that revenue may fall significantly as senders shift to alternative transfer methods, including cryptocurrencies. Still, recipient families would most likely feel the impact through reduced remittance amounts or higher transfer costs, according to the U.N. economic commission.

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