Check out our newest blog post for our Get Educated, One Topic At A Time blog series! Learn about Foreign Direct Investment and its effects on Latin America and its economy. Don’t forget to check out the first two posts of this series as well, “Creating A Road To Democracy” and “A Historical Moment For Genocide”. Check back next Monday for another post!
This fall at the UNAGB Regional Model UN Conference, the Economic Commission of Latin America and the Caribbean (ECLAC) will be debating foreign direct investment into the region. Today, Latin America accounts for 10% of the global FDI stock.
Investment spending by foreign multinational corporations in the region was worth USD$ 85 billion in 2010. Foreign direct investment not only creates capital through Greenfield investments, but also technological and other positive spillovers that have been vital in accelerating the economic growth of booming economies of Brazil, Mexico and others in the region. However, it is most important to analyze and discuss whether the economic growth has led to an increase in the quality of living of all people in the region.
Historically, foreign corporations have economically exploited the region since the colonial era. Spanish and Portuguese settlers forced indigenous people to mine silver and cultivate sugar so that the natural resources of the region could be shipped back to Europe. To some critics, colonialism in Latin America did not end with the revolutions that brought independence to the region—it has merely changed in form, from military power to economic power, into neocolonialism. The American corporation United Fruit Company, now known as Chiquita, owned entire regions of Guatemala, gaining even more power than the local government. With its military force back by the U.S., domination of banana plantations, and control over railways and other infrastructure, the United Fruit Company was named “the octopus” by the local people and ultimately caused the many problems with underdevelopment, crime and violence that the impoverished country still has to deal with today.
With the NAFTA agreements to create maquiladoras in 1993, over a million Mexicans started working at thousands of industrial factories along the U.S.-Mexico border, manufacturing products from apparel to auto parts for American, Japanese, and European corporations such as General Motors and Samsung. Lax regulations on these factories have caused harmful effects on Mexico’s environment. Employees are paid minimally for working up to ten hours a day. Increasing competition with other newly industrializing countries in recent years has caused many maquiladoras to shut down, causing unemployment for hundred thousands of workers. Foreign direct investment brings both positive and negative effects to the region.
Foreign direct investment has increased the competitiveness of the Latin American economy, fostering an increasing number of regional corporations that are starting to go global. “Multilatinas” like Petrobras and more are climbing up on the Fortune Global 500 list. ECLAC will be presenting its annual Economic Survey of Latin America and the Caribbean, a report of the region’s economic performance country by country, at its headquarters in Santiago, Chile this Wednesday, July 13.