We invite you to read the new article on Ideas de Peso, a blog where economists working at the BCRA share their opinions:
According to the latest Monetary Policy Report investment was the component of domestic demand that stood out in the current expansion phase. Indeed, gross domestic fixed investment rate rose by 11.3% y.o.y. in 2017 and the investment rate in terms of constant prices is close to the highest one recorded in 2011. In this context, foreign investment has been hand in hand with such evolution.
As shown by last year’s balance of payments, the flow of direct investment (FDI) totaled US$11.857 billion, the second highest figure of the historical series since 2006. This meant a 264% increase vis-á-vis 2016, especially on account of an increasing number of loans among affiliates and a rise in reinvested earnings. Such figure is even more significant considering that it is higher than that observed during the foreign exchange clamp. Back then, a part of what was booked as FDI stood for retained earnings and forced debt to parents, not as the product of market decisions, as is the case today.
Drawing a historical and regional comparison, the performance of private-sector residents' portfolio investments may have been even more significant, amounting to US$6.215 billion in 2017—the highest figure in absolute terms among various countries of the region, especially on account of the placement of shares by firms residing abroad (twice as much as in 2016 and 11 times as much as in 2015).
April 25th, 2018