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Region: competing with Asia for investment

Monday, May 14, 2012

It's too soon to know if much will change, at least in the near future. But the head of Nicaragua's investment promotion agency said at a conference in Guatemala last week, that the region needs to promote itself collectively, in order to attract foreign capital, as opposed to doing so on a country-by-country basis. The real competition for foreign direct investment (FDI) is not between any two Central American countries, said Alvaro Baltodano, but between the region and Asia. Central America last year attracted just over $8 billion in FDI, about the same amount per person as Mexico, which in past years has tended to outperform the region. On the other hand, FDI per person in Colombia in 2011 was nearly double that of Central America. Joint promotion could create conflicts, as each country seeks to get the maximum share of funds sent to the region. On the other hand, the small size of the each country in the region often makes investment promotion expensive and inefficient. Collective promotion, by contrast, could increase the total amount of FDI, which Central America may attract.