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Foreign Direct Investment in Latin America and the Caribbean 2010

image of Foreign Direct Investment in Latin America and the Caribbean 2010

In 2010, the Latin American and Caribbean region showed great resilience to the international financial crisis and became the world region with the fastest-growing flows of both inward and outward foreign direct investment (FDI). The upswing in FDI in the region has occurred in a context in which developing countries in general have taken on a greater share in both inward and outward FDI flows. This briefing paper is divided into five sections. The first offers a regional overview of FDI in 2010. The second examines FDI trends in Central America, Panama and the Dominican Republic. The third describes the presence China is beginning to build up as an investor in the region. Lastly, the fourth and fifth sections analyze the main foreign investments and business strategies in the telecommunications and software sectors, respectively.

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Telecommunications operators and the transition to convergence and broadband

The telecommunications industry stands now at a particularly complex juncture brought about by the extensive penetration of communications services, rapid pace of technological development, collapse of traditional barriers between communications services (fixed and mobile telephony, broadband access, Internet, pay television and broadcasting) and evolving consumer habits. As a result, current regulatory frameworks are becoming obsolete and the major operators must urgently adjust their business models and corporate strategies accordingly. And with traditional sources of revenue based on voice traffic dwindling, sector companies are under pressure to enter new business segments for handling data traffic. At the same time, old networks are increasingly overloaded by new applications that require greater bandwidth (especially video), making bandwidth saturation a genuine concern. Operators are responding by migrating to next generation networks based entirely on the Internet Protocol (IP). This presents the industry with a dual challenge: making the necessary investments in infrastructure to meet the new services’ technical requirements, while consolidating and boosting the demand for those new services in order to reverse the downtrend in revenues and ensure the sustainability of the new business models adopted.

English

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