Press Conference in connection with the launch of World Investment Report 2006: FDI from Developing and Transition Economies: Implications for Development Presentation by Professor Tagi Sagafi-nejad Texas A&M International University On behalf of the United Nations Conference on Trade and Development (UNCTAD) Mexico City, October 16, 2006

History of WIRs The annual series began in 1991 under UNCTC Have been published annually under UNCTAD since 1993, with rave reviews every year Most authoritative source on foreign direct investment (FDI) and Transnational Corporations (TNCs) Scholars gather to review drafts and give feedback to UNCTAD For last 2 years, regional workshops have been held in Mexico

Global Trends Top Five developed countries account for under 50% of FDI inflows (down from 70% in 1980 Top Five developing countries account for less than 20% (Chart p, 4)

Global Trends (cont) Liberalization of FDI regimes continues Regulatory changes favorable to FDI are four times as high as those less favorable However, the downward trend seems to have reversed (3, 14, 12, 24, 36, 41 unfavorable changes between 2000 and 2006) Table p. 24)

Regional trends Developed countries continued to account for the bulk of FDI outflows South, East and South-East Asian economies remained the largest recipients among developing countries About two-thirds went to China ($72bill) and Hong Kong ($36bill)

Regional trends Latin America and the Caribbean saw only a 3% increase, a much lower growth rate than in 2004 Yet the amounts were substantial Brazil, Chile and Mexico witnessed decreases in FDI inflow

Developing Countries Developing countries, as sources of FDI outflows, strengthened their global position in 2005, investing US$117 billion.

Latin America: Disturbing signs Move toward a greater economic role for the State shifts in Government policies that directly concern foreign investors or industries The case of natural resources sector In Bolivia, the Government decreed the nationalization of hydrocarbon resources and required foreign TNCs to sign new concession contracts. In Venezuela the Government took control of 32 oilfields previously under foreign operation.

Trends in Latin America

FDI Potential vs. Performance A new index, since 2000 Measures ability of a country to absorb FDI and the amount it actually receives Table p. 24 See matrix  FDI Potential vs. FDI Performance Front-runners (Chile, T&T) Below potential (Argentina, Brazil, Mexico) Above potential (Bolivia, Costa Rica, Ecuador, Jamaica) Under-performers (Colombia, El Salvador, Guatemala, Venezuela

Outward FDI from Developing Countries Why?  Globalization  Sign of economic maturity  Becoming more competitive  Good for home country Universe of Third World TNCs is growing But limited to a few countries

South-South FDI From $4 bill. in 1985 to $61 bill. in 2004 (15- fold increase!) Some $48 billion (78%) is inter-Asian In Latin America, Argentina, Brazil and Mexico accounted for most of the $2.7 bill.

Third World TNCs Universe is growing  Ten from Mexico (largest number in Latin America)  Two from Brazil See Table P. 283 Driving forces Push factors Pull Factors

Push factors Rising costs at home Bi-pass trade barriers Competitive pressures Political push

Conclusions Globalization is the main driver of the process Sources of FDI are diversifying The nature of the TNC as a global entity is changing But not all TNCs are driven by the same forces Overall, the near term prospect is optimistic, but in the long run,……….?

Thank you!