Five-year Forecast - June 2004

Our forecast is that capital flows to Latin America will recover over the next five years. Our major contention is that the composition of these flows will change. Currently the split is between foreign direct investment (74%) and debt (30%); Portfolio investment is currently negative. We argue that a component which has hitherto been a bit ignored by macro-economists, remittances, will become increasingly important. So too will intra-regional flows of funds.