IIF Sees Capital Flows Rising 20% in 2007

The Institute of International Finance (IIF) predicts that net private capital flows to Latin America will rise to around $55 billion in 2007, up 19.6% from the $46 billion seen last year, but still short of the $71 billion 2005 number. The IIF pins the rise on equity investment, which it expects will offset a projected fall in private creditor flows. The IIF also predicts a return of non-bank creditor flows, to $1.3 billion, from a 2006 outflow, while net equity investment is seen close to $52 billion, almost half to Brazil. Net direct investment meanwhile is expected to jump to $45 billion in 2007 from under $29 billion last year, boosted by sustained economic recovery. Flows to Mexico, mostly manufacturing and financial sectors, are forecast by the IIF to fall to $13 billion from $16 billion, while Brazil gets $13 billion versus a $6 billion loss in 2006. Chile is forecast to see a drop in net direct investment to $6.5 billion from a record $8 billion in 2006. Portfolio equity investment is forecast to jump to a record $12 billion in Brazil in 2007, while Mexico sees a $2 billion gain and Chile loses $6 billion. The IIF also predicts regional growth of 4.2% in 2007, down from 4.8% in 2006, deflated by lower commodity prices. A near 50% decline is forecast for Venezuela, down from 10.2% in 2006. Argentina is seen slowing to 6.4%, from 8.5% this year, while Brazil is the lone riser, with a 3.8% forecast.