São Paulo has been declared the winner in fDi’s Magazine South American States of the Future 2014/15 ranking with Metropolitana de Santiago and Rio de Janeiro following in second and third places. fDi Magazine publishes foreign direct investment news.
As Brazil prepares to host the FIFA Football World Cup later this year and the Olympic Games in 2016, the country is attracting the attention of investors. In fDi’s inaugural ranking of the South American States of the Future, Brazilian states stood out in the overall top five, claiming two places in the list.
São Paulo topped the leaderboard and also placed first in terms of its economic potential. The state is a huge recipient of FDI in the region, receiving 20.38% of all of South America’s FDI between January 2008 and December 2013, according to data from greenfield FDI monitor fDi Markets.
São Paulo also placed second in the categories of Human Capital and Business Friendliness. This, coupled with its first place ranking in the only subjective category, FDI Strategy, marked a strong performance for South America’s most populous state. In terms of the FDI Strategy category, judges were impressed with the location’s numerous public-private infrastructure projects, which will increase rail, air, power and water connectivity to the city.
“São Paulo state is considered the engine of the Brazilian economy,” says the chief executive of investment promotion agency Investe São Paulo. “Occupying 3% of the national territory, it represents 22% of the country’s population [42 million people] and 33% of Brazil’s GDP.”
Metropolitana de Santiago was the highest ranking Chilean state, achieving second place overall. Chile’s most populous state also ranked second place in the Economic Potential category, as well as placing first of all major South American states in the Cost Effectiveness category and third of all major states in the Infrastructure category, thanks in part to the country’s excellent logistics networks and internet connectivity.
Brazilian state Rio de Janeiro placed third in the ranking – also ranking third for Economic Potential and second of all major South American states in the Infrastructure category. The location also ranked second in the qualitative FDI Strategy category, in part thanks to its creation and implementation of a subsea cluster, “which intends to attract and support the development of subsea suppliers and subsea equipment manufacturers for the oil and gas sector, since Rio represents more than 80% of Brazil’s production of oil and 40% of natural gas”, according to state officials.
Small and spirited
Argentina’s Buenos Aires Autonomous City ranked first of all large South American states, topping the large category tables Economic Potential, Human Capital and Business Friendliness. The state’s low unemployment rate and high GDP, as well as the high number of jobs created by foreign companies and its increased level of education enrolment, ensured its high standing in the tables.
The Chilean state of Antofagasta ranked first of South America’s mid-sized states. The state has a huge mining sector, which accounted for it being the fourth largest recipient state in the region for FDI per 100,000 people. Job creation through FDI peaked in 2011, according to fDi Markets, when 10,649 jobs were created over six projects, four of which were in the mining sector.
Another Chilean state, Atacama, ranked first of all small locations, as well as placing first of all small states in the Economic Potential category, thanks in part to Chile’s low inflation rate and the state’s high GDP per capita.
As Brazil’s two big FDI players, São Paulo and Rio de Janeiro, prepare for their time in the international spotlight, will these locations hold their places in the 2016/17 rankings? Or will states such as Metropolitana de Santiago, with its rising FDI levels, surge ahead? Chile’s economy is growing year over year. With 2014 growth set to reach 3.75% to 4.75% and with three of the top 10 places in this ranking, only time will tell.
To create a shortlist for the fDi South American States of the Future 2014/15, the fDi Intelligence division of the Financial Times collected data using the specialist online FDI tools fDi Benchmark and fDi Markets, as well as other sources. Data was collected for 237 states under five quantitative categories: Economic Potential, Human Capital, Cost Effectiveness,
Infrastructure and Business Friendliness.
In addition, surveys were collected under a sixth category, FDI Strategy. This category is the only qualitative category and does not feed into the overall results as in previous rankings. For this category there were 26 submissions; locations submitted details about their strategy for promoting FDI, which was then scored byfDi’s judging panel. Locations scored up to a maximum of 10 points for each datapoint, which was weighted by importance to the FDI decision-making process in order to compile both the subcategory rankings as well as the overall South American States of the Future 2014/15 ranking.
States were categorised according to population. There were four categories: major, large, mid-sized and small. Major states are those with populations of more than 4 million. Large states have populations of between 1.5 million and 4 million; mid-sized states between 500,000 and 1.5 million; and small states have fewer than 500,000 residents.
This article is sourced from fDi Magazine