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FDI Grows, But So Do Risks

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A closer look at foreign direct investment in Latin America and the key trouble spots.

BY CHRONICLE STAFF

In Brazil, Latin America's largest economy, the government decides to break the patent on a HIV drug of Merck. In Venezuela, the region's fourth-largest economy, the government has announced it plans to leave the World Bank and IMF just as it formally takes over control of four heavy-crude oil fields from foreign multinationals. It also has threatened to nationalize the banking and steel sectors following the nationalizations of the country's top telecommunications and electricity companies. In Ecuador and Bolivia, the governments announce they will reassess all bilateral investment treaties. Ecuador also expels the World Bank representative.

Hardly encouraging news for foreign investors. While foreign direct investment in Latin America last year reached a total of $72.4 billion, that represents a mere 1.5 percent increase over 2005, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). It also represents a lower figure than the annual average in the 1997-2001 period, the commission points out.

VENEZUELA MELTDOWN

Although FDI levels have slowed down since the 1990s when the region was aggressively privatizing major assets, the levels have also been affected by reduced interest in countries like Argentina and Venezuela. Despite a recent economic boom in Venezuela, for example, many foreign multinationals are growing concerned about developments there.

"I have to say that I am a little concerned about the future and what will happen given the nationalizations going on in Venezuela, what that will do for our business," says Roger Crook, CEO of DHL Express International Americas, the largest express cargo company in Latin America. " At this stage, it's unclear. I do have a question mark."

U.S.-based fast food restaurant chain Wendy's International is in a similar...

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