Executive Summary
Global flows of foreign direct investment, after a strong recovery in 2015, lost dynamism in 2016, declining worldwide by 2% year-on-year (y.o.y.) in a context of weak global economic growth, with Latin American economies affected by a fall of around 10% as a whole.
At the local level, as of December 2015, a series of measures were adopted in order to stimulate investments in the country. To this end, together with the normalization of access to the foreign exchange market, regulation was made more flexible, favoring greater freedom for the movement of capital abroad.
In this context, during 2016 Argentine direct investment companies canceled liabilities with their investors, both debt instruments and undistributed profits, which they had been accumulating in the period characterized by greater exchange restrictions operating between 2011 and 2015. In this way, they began a process of readjustment to their previous levels of indebtedness.
The fall in the estimated income in U.S. dollars of direct investment companies, together with the fall in the reinvestment rate to a level similar to those observed prior to 2011, resulted in reinvestment flows during 2016 of US$ 1,829 million.
Likewise, as a result of the normalization of access to the foreign exchange market, net debt cancellations with related companies were recorded for US$ 4,768 million, reaching an all-time high in the series surveyed, with net payments of commercial debt for US$ 4,063 million and financial debt for US$ 705 million.
Net capital contributions resulted in revenues of US$ 3,279 million and net income from transfers of equity interests reached a value of US$ 56 million.
Consequently, net FDI inflows totaled US$ 395 million in 2016.
Thus, as of December 31, 2016, the estimated gross passive position of FDI in Argentine companies reached an estimated value of US$ 74,922 million, representing 14 percentage points of GDP. Of this total, 71% corresponded to shares in the value of the net worth of companies (US$ 53,332 million) and 29% (US$ 21,590 million) to direct investment debt liabilities.
