martes, 28 de junio de 2011

The Chile’s FDI


Chile’s FDI.- From the time when Chile's Foreign Investment Statute came into force in 1975, most large foreign investors have chosen to use this mechanism under which an investor signs a deal with the state of Chile for the capital transfer or other forms of investment and receives a number of specific rights and guarantees. 

From1975 until 2009, investments for US$75,101 million, representing 66.9% of total gross FDI inflows, used this mechanism.

From 1975 and 2009, FDI worth US$110,953 million was materialized in Chile while, according to the Foreign Investment Committee's statistics, net FDI entering the country reached US$71,158 million.
Between 2000 and 2003, the mergers and acquisitions (M&A) market - previously the driving force of FDI around the world and in Chile - collapsed globally while a weaker corporate earnings and drop in share prices led many international companies to suspend or cut back expansion plans. To some extent, this trend represented a return to more sustainable and realistic FDI levels, after the so-called "investment bubble" of the 1990s during which international capital flows reached record levels.
What is more, FDI flows into Latin America were also strongly affected by instability in some of the region's countries and the huge losses sustained by a number of investors. As a result, risk aversion -accentuated by shareholder pressure in firms that experienced difficulties - also helped to explain weak FDI in the region. In the case of Chile, FDI figures were also distorted by a trend towards greater use of the local capital market by foreign investors. Encouraged by the dynamism and high liquidity of the country's financial sector and especially low interest rates, ever more overseas companies sidestepped exchange rate risk by raising finance locally, either by borrowing in local currency or placing bonds on the local market.

This trend, although very positive for Chile's financial market, was reflected negatively in figures for incoming FDI.