Thirty-one lecturers and students from Colombian core member, Universidad EAFIT, joined a Vi videoconference presentation of the latest UNCTAD World Investment Report (WIR) September 13. Another 50 or so, from afilliate members, Universidad de La Sabana and Universidad Sergio Arboleda, joined the discussion via webcast.
"Foreign Direct Investment (FDI) flows increased by 38 percent in 2015,” said report presenter, Stephania Bonilla-Féret, of UNCTAD's Division on Investment and Enterprise. “However, they lacked productive impact, as growth was mainly brought about by a surge in mergers and acquisitions (M&A) driven by corporate reconfigurations, including tax inversion." Discounting these large-scale corporate reconfigurations implies a more moderate increase of about 15 percent, she added.
Trends for 2015 indicate that after three successive years of contraction, FDI inflows to developed countries bounced back sharply to the highest level since 2007, driven mainly by exceptionally high cross-border M&A values.
Developing countries observed an increase of 9 percent in their FDI inflows compared to 2014. Bonilla-Féret alerted, however, that the situation was highly heterogeneous among this group of countries, with the Asian countries attracting most FDI, while inflows to Latin America, Africa and transition economies decreased from those of the previous year.
"This is mainly due to challenging macroeconomic conditions, as well as slowing aggregate demand and worsening terms of trade in many countries due to falling commodities prices," she said. All these factors add up to muted prospects for FDI performance for 2016, according to the report.
The participants were particularly interested in the trends and prospects for FDI in Colombia, which, much like the rest of South America, was affected by a lower FDI performance brought about by low commodity prices.
In Colombia, "the fall in FDI inflows into sectors such as gas and petroleum was partly offset by a rise in FDI flows in other sectors, such as retail,” she said. “In addition, a depreciation of the national currency also brings about opportunities for foreign investors, as reflected by a rise in cross-border M&A sales in Colombia at the beginning of 2016."
Bonilla-Féret concluded the presentation by discussing the notion of investor nationality, this year’s WIR special topic.
A majority of countries continue limiting investment on the basis of investor nationality, but “as companies are increasingly internationalized, with fragmented productive processes, the concept of 'investor nationality' is becoming blurred," she said.
The WIR advocates for a re-evaluation of ownership-based rules. These include strengthening the assessment of ownership chains through improved disclosure requirements, as well testing the "fit-for-purpose" of ownership rules compared to mechanisms in investment-related policy areas such as competition.