As 2021 unfolds, recovery for economies devastated by the COVID-19 pandemic is a top priority for countries around the world. The International Monetary Fund projected last autumn that the global economy would shrink by 4.4% in 2020, a decline the organization said the world hadn’t experienced since the Great Depression in the 1930s.
The economic pain has been especially acute for developing countries, due to the global financial system that impedes the access of cash for nations in the “global south.” A newly released study, however, is providing some possible optimism for some countries across Latin America. Chile has the greatest potential for countries across the region to attract foreign investment, according to the report from the Milken Institute, an independent economic think tank based in Santa Monica, California.
The study, entitled the 2021 Milken Institute Global Opportunity Index, examines foreign investment potential for 145 countries using 96 variables, such as macroeconomic outlook, potential for future innovation and development, access to financial services and conformance to international standards.
Sweden is the l No. 1 country for having the most foreign investment potential this year, according to the report, with the United Kingdom and the United States ranking second and third, respectively. The report notes that high-income countries historically perform well in the organization’s annual Index, due to overall economic resilience, strength in their economic institutions, and rule of law.
This year the report focused on Latin America, and it states that the region compares well against other emerging and developing economies in two key areas: having a highly qualified and diverse workforce and the breadth and depth of the region’s financial systems.
“The Global Opportunity Index measures a country’s attractiveness to foreign investors based on five broad categories that give investors the tools to determine their own appetite for risk,” said Claude Lopez, the report’s author and head of research at the Milken Institute, in a statement.
According to Milken, these are the top five countries for having the greatest potential to attract foreign investment in 2021:
1. Sweden
4. Netherlands
5. Switzerland
These are the five Latin American countries with the greatest potential to attract foreign investment this year:
1. Chile
2. Uruguay
3. Costa Rica
4. Mexico
5. Panama
Why is foreign direct investment (FDI) important to countries? FDI can spur economic growth, particularly in emerging economies. FDI can create jobs and can also lead to introducing technology and technical expertise to developing countries.
Critics, however, say that once FDI becomes profitable, it can lead to capital moving to the investor’s country and out of the host country. Concerns have also been expressed over FDI disrupting local industries by attracting the best workers and thus creating income disparity.
Spurred by economies that shuttered due to the COVID-19 pandemic, global foreign direct investment collapsed in 2020, falling 42% from $1.5 trillion in 2019 to an estimated $859 billion, according to the United Nations Conference on Trade and Development’s Investment Trends Monitor.
More from U.S. News
Major Economies Eye Economic Recovery in 2021, Analysts Say
The Top 10 Global Risks for 2021
Government Support Needed to Drive Global Economic Recovery, IMF Says
Chile No. 1 Latin American Country for Foreign Investment, Study Says originally appeared on usnews.com
