Monday, August 04, 2008

Foreign investment in El Salvador surges

El Salvador ranks high among Latin American nations in attracting foreign direct investment according to recent statistics in the Latin Business Chronicle. The Chronicle looked at foreign direct investment (FDI) as a percentage of a country's gross domestic product. The higher the percentage, the more successful is a nation in attracting investments, considering the size of its national economy. According to the Chronicle:

FDI in El Salvador exploded last year - going from $219 million in 2006 to $1.5 billion last year. As a result, El Salvador now has Latin America's third-highest FDI per GDP. Its FDI represents 7.4 percent of the country's GDP of $20.4 billion. Costa Rica - another Central American nation - also did well. Its FDI represents 7.3 percent of its GDP of $26.2 billion. FDI to Costa Rica reached $1.9 billion last year, a 29 percent increase.

This reflects a willingness of investors outside of El Salvador to invest in the country, and a belief that such investments are a good business risk. The statistics don't tell the whole story, however. For example, how much of that investment went into gold mining companies which might never be allowed to mine? How much represents the sale of all the major Salvadoran banks to foreign financial institutions? How much is going into productive enterprises that are producing good jobs? Despite these questions, I am certain it is better to be at the top of this list than at the bottom.


Anonymous said...

Tim, 2007 FDI surge was totally a one time spike. Even the Salvadorian government admits that it was due almost entirely to the sale of Banco Agricola to a Colombian Group. If you phase that out, FDI in El Salvador is lagging behind all the other Central American countries, including communist Nicaragua.

Dean said...

Unless I'm mistaken, it was reported in the press about three months ago that almost 100% of the leap in foreign investment last year was accounted for by the $500-plus takeovers of two banks.

Dean said...

P.S. I should say, $500 million-plus.

Quentin said...

Tim I would love you to defend your comment at the end that you are sure it is better to be at the top of this list than the bottom. Not saying that you're wrong, I would just like to see your reasoning.