r"'r':' . o r r-----____.-., '" THIS REPORT HAS NO]' BEEN RELEAS~D TQ THE EXECUTIVE DIttECTORS I Rep 0 r t No. EC -98a - " This report was prepared for use within the Bank. It may not be published nor may it be quoted al representing the Bank's views. The Bank accepts no responsibility for the accuracy or completeness of the contents of the report. f) INTERNATIO!!NAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL MOVEMENTS :J<' OF PRIVATE LONG.-TERM CAPITAL " o August 7 J 1961 . ';.. ~ Economic Staff Il CONTENTS Pa.£~, Introduction 1 • Main Conclusions 2 Outflow of Private Long-Term Capital from Capital- '- Exporting Countries 3 (; U.S. Investment 4 Investment by Other Countries 5 1. United Kingdom 5 2. France 6 3. Germany 6 4. Netherlands 6, Private Long-Tem Capital Receipts by Underdevel,?ped Countries ' 7 '7~\ Bra:z'xl 8 India 9 I) Mexico 9 Statistical Appendix: Table 1 - U.S.: Outflow of Private Long-Term Capital, 1956-1960 Table 2 - U.S. Direct Investment Capital Flows and Undis- tributed Subsidiary Earnip.gs) 1950-1959 Table 3 - u.S. Direct Investment Capital Outflows by Major Areas and Industries 1950-1959 Table 4 - u.s. Direct Investments in Manufacturing Enter- /! prises Abroad 1950, 1957 and 1959 Table 5 - United Kingdom - Private Direct Investment (Excluding Oil and Insurance) in 1958 and 1959 Tal;>le 6 - West Germany: Net Private Direct Investment Abroad Table 7 - Estimateg Exports of Private Long-Term Capital to Countries in Course of Economic Development 1956'!-1959 Table 8 - Latin America: Long-Term Private Capital Nove- ments Table 9 - Brazil; Foreign Capital Inflow into Direct Investments Table 10 - India - 1. Gross and Net Inflow of Foreign Private Capital (Including Retained Earnings) in 1956-1959 2. Gross Inflow of Foreign Privata Capital Classified by Type of Flow 1956-19.59 I?' 3. Foreign Business Investments in India Classified b~' Industry 4. Non-Banking Business Investments as of the end of 1959 Table 11 - Mexico: Foreign Direct Investments - 1 - INTERNATIONAL MOV~~TS OF PRIVATE LONG-TER}l CAPITAL o I; Introduction For all its importance, a systcl"Jutic survey of the international flow of long-term private capital has not yet been attempted. The difficulties in such an undertaking are indeed numerous. Except for the United states, which annually reports on its internati.onal investment po~ition, none of the capital exporting countries have a sufficiently detailed series covering a significant period of time. Indeed, even the data published by the United states are not comprehensive enough; for example, whereas data on U.S. direct investments abroad are good, those on other kinds of capital movements are not shotv.n in as much detail. Moreover, it is not possible to determine the net outflow of private capital from the U.S. because data on foreign capi tal flot.ving into the United states are not classified as "private" and "public~l' capital. Information on British and F1rench private capital exports is very impre.cise. In large part, this is because, in the absence of exchange control. on intra-:zone transactions, it is impossible to accurately evaluate the m.agnitude of such transactions t-lithin the Sterling and French Franc zones. (( . ,/ Some information on other capital exporting countries is availabl(§ '., though not in enough detail. Usually the figures are aggregative and do not indicate which coun~ries, or sometimes even which areas, received these capital flows. Q Balance of payments data are also not very useful. Quite often there )1 is no distinction made ,pet'toJ'een direct investment and other forms of private capi tal; the figures relate to "net" flows and, in several instances, the "net t data relate to long-term as well as short-term capital. Finally, data)on private export credits usually are unidentifiable. Ideally, it should be possible to relate aggregate flows from capital- exporting countries to capital receipts as recorded in the balance of payments of ,)individual recipient countries. But conceptual difficulties preclude any matching of outflows as recorded by the exporting countries with inflows as recorded by the importing countries. Balance of payments data distinguish between "official and banking" capital and lfpri vat~ non-banking;' capital; hence any series based exclusively on tJ1e latter would exclude commercial bank transactions. Again, the distinction between official and private is based on the reporting country's definition of the nature of the transaction. Th~~, for example, a loan from the Export- Import Bank of Washington ,.\ t'c, say, a private enterprise in Brazil would be c~ecorded in the u.s. balance of payments under ~·public'· capital, and Brazil would record it under ~tprivatelt capital. If, however, the loan were guaranteed by the Brazilian Government, Br~zil also would record it under ('public" capital. Despite these difficulties, the U.N. has for several years published a series on the international flow of private capital. They appear to be based largely on the IMF balance of payments and, therefore, suffer from the drawbacks) mentioned above. !VIore recently the OEEC has published a o - 2 - ~eries sh~wingthe volume of private capital flo~dng from OEEC member coun~ries, ~he UvS., Canada and Japan into countries in course of jev81op~ ment.lI This series is based on a three-way classification of private capital.;;. guaranteed' export credits, other new private lending and invest- ment and reinvested earnings - and on a very precise definition of "countries in course of economiC' development n • But the data are not firm as they are based on staff estimates of the flow of private capital from France to the rest of the Franc Area and of investments by the U.Ko and others financed out of retained earnings. " The U.N. and the OEEC findings are analyzed in the following pages; the v It ,.:1 analysis is supplemented by a more detailed surv~y of private capital flows from the U.S., the U.K. and Germany. Capital receipts by major recipient countries are also analyzed and an attempt has been made to evaluate the net receipt of private long-term capital by 44 low-income countries on the basis of their, balance of payments. Main Conalusions On the'! basis of available data, the following proad conclusions may be dral.;m: i. The iriternat~onal flovT of private long-term capital from~ll}ajor capital-exporting countries inclusive of reinvested earnings£! averaged in excess of ~5.3 billion in 19.58-.59 as compared to between $3 and ~3 •.5 billion p.a. in 19.54~~5. The p~ak was reached in 19.57 when the flow of funds reached a level of ~P~(. 2 billion. ii. The sharp increase in 1956 and 19.57 was ]!largely due to acceler- ated investments in the oil producing coun~hes. For example, U.S. direc\t investment (excluding reinvested ecafnings) :i.n petroleum rose f~om ~?320 million in 19.55 to ~?1332 million in 1957. In 1959 they vletoe down to liP5l1 million. iii. Overall foreign priva'te capital receipts of underdeveloped countrXes in 1956-.59 have fluctuated from a high of same $3.5 bil- lion in 1957 to a low of l)2.3 billion in 1959 largely as a result of changes in the petroleum investment policy of the investor countries. iiJ'.Indications are that more recently, i.e. in 1959-60, there has been disinvestment in countries like the Congo, Cuba, Kenya, the mt';id~sias ,South Africa and Tanganyika. arising out of disturbed political conditions or uncertainty regarding their political future. v. In recent years, private venture capital is reported to be i~­ cre~singly interested in manufacturing facilities abroad. Firm statistical"data in support of this view are not however available except for the U.3.. Generally, it would appear that the average annual rate of U.S. direct investment in manufacturing facilities abroad was higher in 1955-59 than in 1950-54. The bulk of the in- crease was in ,respect of other industrialized countries, principally Western Europe and Canada. y The Flow of Financial Resources to Oountries in Course of Economi.c Development, 1956-59. OEEO, 1961. g/ The U.N. series which is our source apparently includes, in most cases, reinvested earnings but data on reinvested capital are not identified; this may be estimated roughly at arolmd ~i1. 5 billion p.a. in 19$8-59 on the basis of other sour~eR~ - 3- OUTFLOW OF PH.IVATE J.lONG-TERN CAPITAL FRON CAPITAL-EXPO!!!~~ITJl!;I:S Basic inadequacy and imprecision in reporting on private capital flows militate against a detailed analysis of overall private long-term,c capital movements in ter.ms of gross and net flows Qr in terms of direct investment versus portfolio and other capital and the sectoral distribution of foreign direct investment; any discussion has perforce to be in generalities often uncorroborated by firm statistical data. In view of the dearth of data, it is risky to speak of a clearly measur- able trend in private long-ter;m capital flows. However, there is sufficient evidence to suggest that there has indeed been a sizeable increase in the volume of private long-term capital flowing in recent years compared to the early postwar years. \\ \\ According, to the U.N. Department of Economic Affa\~rs, ~vhich has periodi- cally reported on the international flow of private cal?i tal, the average annual net outflow of private capital from the U.S., U~~., Switzerland, France and Belgium in the immediate postwar years 1946-52 ave~laged in excess of $1.5 billion; . . the r~~a. of flow ... ~n the last few years of the perio~ was in the order of over ~2.5 b~11~on p .. a.1t' In. 1954-55 the ~ate had, according to the same source, risen to between $3.0 to $3.5 bi1lion\~.a. In 1957 it reached a peak of $6~ 2 billion and" after declining to some $5."3 billion in. 1958 ,may again' have risen in 1959.Y TREND OF OUTWARD CAPITAL MOvm~ENTS 1956-58 COMPARED to 1950-52 (ifi $ million) 1950-52 average 1956 19~7 1958 u.s. 1709 3420 3934 3293 U.K. 560 1205 1120 840 w. Europe 354 1155 1171 1167 Total - 2622 5780 6225 2lQQ Source: "The International Flow of Private Capital, 1946-52", U.N., 1954; and "Economic Development of Underdeveloped Countries - International Flow of Private Capital, 1958-59", U.N., E/3369 of I~lay 13, 1960. ~: The U.N. sources do not specify whether the above figures are gross or net; it would, however, appear that they are gross in the sense that capital imports by capital-exporting countries have been excluded. It must be noted that the year-to-year data are not strictly comparable • because coverage of capital-exporting countries in recent years is rather wider than for the early postwar years. The figures should not be construed JJThe Int.ernati.onal FlOri of Private Capital, 1946-52. In real terms an outflow in excess of ~2 billion in the latter part of this period corresponds to about half the flow in the 1920's. ~ It is not possible to be more explicit since only partial data for 1959 are available. ? if 1/ ( - 4 as representi~g long-term capital flows as in some instances they do includ.e short-term capital. Nor do they in all cases include reinvested earnings. It is apparent from the above estimatesC~at the overall volume of private long-term capital exp'Orts are largely dominat.ed by U.S. capital, Which has accounted for rather more than 60% of the overall flow of private long-term capital in the decade 1950-59; if the post-war years prior to 1950 are considered; the proportion is even higher because of the massive disinvestment of European capital" that occurred in those years. U. S. Investment The quantum of private long-term capital of U.S. orl.gl.n seeking investment abroad has in recent years (1956-59) been at a rate about twice as large as in 1950-52. The outflow of U.S. private long-term capital, inclusive of private U.S. purchases of IBRD bonds, reached a peak of $4.3 billion in 1957, i.ee" about two and a half times the average 'level in 1950-52. Almost 90% of this amount !-1as in respect of direct investment: $2. 5 b~Ilion in net new capital and $1.4 billion in undistributed subsidiary earni-hgs. The impetus! to these massive investments~~soverseas petroleum exploration and develop- ment. Roughly two-thirds of new 4irect investment capital flows in 1957 was accounted for by petroleum, and about an equal proportion of outlays on petroleum lvere in Latin America, almost wholly in Venezuela. u.S. direct investment in the petroleum indus~ry financed by new capital declined sharply to $0.5 billion in 1959 from the level of $1.3 billion in 1957. However,. considering the excess of world productive capa- city relative to world demand, this was still substantial. Fluctuations in petroleum investments should not obscure the fact that there has been, over the years, a substantial increase in investments in manufacturing facilities abroad; net net-l capital flowing from the U. S. in foreign manufacturing enterprisesaYeraged $280 million a year in 1955-59 as compared to $130 million a year in 19.50-54. In 1959 alone such invest- ment amounted to $460 million; more striking is the fact that investments in "manufacturing" out of retained earnings were 'even higher - $574 million - so that the total amount of investment in manufacturing amounted to over $1 billion or 40% of overall U.S. direct investments in 1959. The bulk of these investments. were, however, in Canada and \'iestern Europe, vlhich together amounted to some $800 million or -80% of the total. As for U.S. direct investments in manu~acturing enterprises in countries • other than Canada and Western Europe, the position was as follows. The total book value of such investments at the end of 1959 was $2,.2 billion compared to $1 billion in 1950. The bulk of these investments was in Latin American countries which accounted for $1.4 billion or some two- thirds of the "total as of the end of 1959. Oceania (i.e. principally Australia) accounted for $400 million; investments in other countries in Africa and ASia, including Japan, amounted to less than $400 million. Chemicals, rubber products and transportation eqUipment led the field. In terms of growth over thEr'?T~>eriod 1950-59, the picture that emerges 01' U.S. direct inV'estment in manufa.cturing is striking. Over the decade, (7 - .5 - ,\ it llOUld appear that the area illherein the rat~, of gro~ith of U.S. investni~nts is sharpest is Asia; the percentagy increase in the value of investlTJBnt,s\\cver the pEfi'iod was 315%. Countries important in this area al"e Japan, India t\pd the Philippilles. The rate of increase in the case of Oceania (priraarily:.\ Australia) is next at 285%. Europe' comes third 'tn th 21476. The rate of i:~­ crease in the case of Latin America (83%) 'VTas less than in Africa (118%), ':Iand in Ca.,.?ada it was only 140%. '1\\ The .:f'astest grouth of investments in manufacturing has been in trans~:'1 portation equipment (230%~, chemicals (224~n, metals (202%) and non-e1ectr~\Lca1 machine~J (186%). >' The bool\: value of over-all U.S. direct foreign investments stood at ~~2','\9 ..;7 billion at the end of 1959. About one-half of this 'VIas accounted for by iri\.. vestments in Canada «(?10~t2 billion) and in ~'Jestern Europe (~~5. 3 billion). 'I: Direct investments in Latin America 'VIere valued at ,)8.2 billion (i.e. about: 28% of the total). Ll1vestments in all other areas accounted for only ~j6 bi:L- lion or 20% of the total. Investment ~r Other Countries Comprehensive data on private long-term capital f~o'tvs from other capital::- exporting countries are not available; informati.on at hand, hOvrever, suggestls that they rose at a rate roughly comparable to that of U.S. capital over the period 1950-59.0;- Some comrfients on capital flo~vs from the tllore important of these countriE,~s are offered below. 1. United Kingdom The United Kingdom Which, as a foi~~ign investor, ranks next only to the U.S. has not published, arty statistical \~eries comp~rabl~Lto that of the U.S. A White Paper dealing specifically with the questioh:';b~"t'inAssistance from the United Kingdom for OVerseas Development" (Crtmd. 974 of 1\larctJ! 1960) says that Itinformation about the extent of U.K. private investment' Q~jerseas is at present not precise. • • • On the information at present. available , it is estimated th~'t the tota,l has averaged" ~ver the last seven years, £300 million (f~840 million) a year; this estimate includes S1J,mS averaging about £55 million (f.~154 million) a year that has been raised on the London market." The figures eited a.bove are "gross" and include only some reinvested earnings. As may be expected, the bulk of U.K. investments overseas is in the IiRest of the Sterling Area". Between 1952 and 1958, UoKe private investment~; in the rest of the Sterling Area were in the order of £210 million (~~588 rul .." lion) a year, or some two-thirds of' the' over-all outf10l-J' of p:rfivate invest- i ment capital in those years. Quite recently" the U.K. Board of Trade published the results of IfA • Survey of U.K. Direct Investments Overseas in 1958 and 1959". The survey excluded investments in oil and insl1rance. This estimated that direct in- vestment abroad by U.K. companies rose 23% from £145 million in 1958 t,O £178 million in 1959. Altogether investments in the rest of the Sterling Area constituted the bulk (one-half) of the total, wi"t,h investments concen- trated in the countries in which investment has tradit~onally taken place, usually the more developed countries, viz. Australia, South Africa, India, Pakistan, New Zealand, ~1alaya and Ireland. The largest investment,s, howev~r" " -c,6 - were in Canada: f32.6 milli'on in 1959. It is interesting, though not necessarily reyealing of any trend, that the rate of increase in investments in 1959 over 1958 was higher in the case-;:="of=North .America and tijestern Europe than in the rest of the SterlinG': Area. \"~ , '-' \\I~ , )\ Of,·total investments in 1958, 56% was in manufacturing industry, 10% in~agriculture and 7% in mining. It is noteworthy that earnings from direct invl\~stments in agricu1 tur~ accounted for one-fourth of total direct invest- men:~ earnings; the corresponding figure for manufacturing was 48%. II j\ 2,1. France q - \ :t;l:J is extremely difficult to make any precise asse§'sment of private long'e-t'~rm capital ou'tflows from France; the bulk of French capital exports are known to be to the Overseas Franc Area, but the complete freedom of capital to move within the currency area prevents accurate measurement. Even the OEEC has been able to make only a broad estimate of French direct investment in the Overseas Franc Are~. They b~lieve that, inclusivE) of reinvested earnings, this should hav~!) averaged some $350 million eqtli y~lent in 1956-59. No estimates are available for other types gf French private lending to the rest of the Franc Area. .. 3. Germany /.! Thel)Federal Republic of Germany has in recent years become an important exporter of private loq~-term capital; such exports averaged some $270 million in 1956-59. The main component of these funds has l}een guaranteed private eXports credits (about three-fourths of the total) .~) ~. Cumulative data on private direct investment aproad published in an official bulletin indicate that between February 1,1952 and December 31, 1960, German enterprises invested abroad some $700 million in all. Over half of this amount ($375 million) was invested in the Americas with Brazil and Canada each accounting for some 18% and 15% respectively of the overall amount, or over 60% of the amounts invested in the Americas. t.vestern Europe received $245 million, which corresponds roughly to the total received \~ by Brazil and Canada together. Direct investments in 1960 were largely' in the chemical industr,y and accounted for one-fourth of total direct investments in that period. The second largest industry was the electrical industry which accounted for 13%. 4. Netherlands The Netherlands has in recent years stepped up its foreign investment activity •. Fon, the first 'time in several years the overall outflow of private capital exceeded foreign cspilf~ inflows seeking investment in the Netherlands. The gross outflow which amounted to $104 million in 1957 rose to $250 rf~llion in 19.58 and to $369 million in 1959. The ma~t reason for this sharp increase was. the greatly stepped up level of direCt investments '''hich rose from a mere $26 million in 19.57 to an annual rate of over $240 million :l.~ 1958 and 1959~; Ii The inflow of foreign private capital into the Netherlands also rose from $174 million in 1957 to $374 million in 1958. There was some decline -,1 1 p. in 1959 when it amounted to $352 million. Qn a ~e~ '~sis Dutch capital made a posi tive contribution in 1959 when exceeded imports by" some $17 million. . vat('. lonJ~-tefn capi tC!1 exports ..., PRIVA.TE L9NG-TERIvI CAPITAL RECEIPTS BY UNDERDEVEL~AAt'q~UNTRIES Two broad, generalizations may be made abQut the floW of Ptivate long-termcapi tal into underdeveloped countries in the p,,"st d~cad~~•. . First, no strik:j.ng changes in the pattern of recipient cQW).tp:J.es have \\ 'occurredl'in the 10 years 1950-59. By and large, three m~in streams of' fJ..:0'vls continue to flow: ,one from the U.S. to Latin Amer,ica, another from thel~, . , United-Kingdom to the Sterling Area low-income countrie,s, and the thir.q : from France to the Franc-Zone countries, mainly in Afri,ca. Secondly, acceleration in the rate of capital flow to these countries is relatively of recent origin. In the early years of the post-war period, the traditional exporters of capital, barring the U.S., were preoccupied with their own demand for investment capital to the point where most of them had to liquidate their foreign investments. The Korean boom years immediately following were characterized by very favorable terms of trade for the primary producing countries so that underdeveloped countries found themselves in the comfortable position of being able to add to their external reserves. It is, therefore, only in the last six years or so that a quickening in the pace of foreign investment in the undeveloped countries occurred. A hOJT1ogeneous series on private long-term capital outflows (net) into the underdeveloped countries is available only for the period 1956-59; according to these ~igures published by the OEEC, it would appear that the aggregate amou~t of private long-term capital exported by OEEC member countries and UeS., Canada and Japan rose from $).0 billion in 1956 to $3.5 billion in 195"P~ Thereafter it fell to $2.5 billion in 1957 and to $2.3 billion in 1959. The average for the four-year period was about $2.8 billion per annum of which approxi~ately one-third represented reinvested earnings, one- eight~ was accounted for by guaranteed export credits and the remaining, roughly one-half, consisted of net new d,irect investment capital plus net new long-term 10an'Q'~ , The qEEC figures are, how~yer, aggregative and do not show which the recipient countries are. In order that at least as many of them as is possible may be identified, ,"va have examined the balance of payments data of 44 countries, and the results of this inquiry arw summarized below. For this purpose we have adhered to the OEEC definition of underdeveloped countries, lrJhich nexcludes Australia and South Africa, but includes Greece, Spai~, Turkey and Yugoslavia; and have adopted their estimate of French inve~tments in the Overseas Franc Area. The following figures relate to net foreign private long-term capital receipts and is based on the, recipient country's definition of aprivate U ; they include changes in the liabilities of the reporting countries as T;Jell as receipts from pri,rate donations. 2/ To the extent that reinvested earnings are reported., they have been included. :;;,./ Inasmuch ao government grants are included in studies relating to public cap:i:.talassistance, private donations have ~)cen included here. - 8 - /) PRIVATE LONG-TERM RECEIPTS OF SELECTED UND~1DEVELOPEb COUNrrRIES 19 56-19 59~:--~:> (in $ million) 1956 1957 1958 1959 'Europe: Greece, Spain, Turkey and Yugoslavia 186 226 232 233 () ~ ~atin American'Republics 1196 1991 1358 1138 Far East: B,urma, Ceylon, China (Formosa) India, Inddhesia, Philippi.nes, South Korea, Thailand and Vietnam 226 217 202 223 JVdddle East: Iraq, Israel and Pakistan 171 168 159 161 Africa: Ethiopia, Ghana, Libya, Rhodesia and Nyasaland, Sudan and Uihrt 80 87 97 78 CJ Overseas Franc Area (OEEC estimate) 350 350 350 350 Total 2209 3033 2398 2183 Source: IMF Balance of Payments Yearbooks. We must caution the reader that the above data cannot be compared with the OEEC figures because of the more limited coverage of our series an.d also bfecause of the difference in the concept of tCpri vatel\ as used by capital-receiving countries vis-a-vis capital-exporting countries (Vide "'Introduction") • If, would, therefore, perhaps be in order to deal in some detail with t~e experience of a very limited sample of countries on,which we have more detailed information. The countries chosen for our case studies are Brazil, India and Mexico. . Brazil offers a striking example of a country in course of economic q,evelopment, wI-rich has become increasingly important to foreign "investors. According to a Columbia University study, Brazil received between 1955 and 1958 a total of nome $470 million in foreign direct investment capital. &/ The rate of flow in 1958 at $278 million was nine times that of 1955 when it amounted to only $31 million. The main reason for this extraordinary growth in foreign direct investments would seem to be the policie? initiated i~ 1955 b.Y the Brazil Government for stimulating foreign investment. The largest foreign direct investments in Brazil are u.s. in origin. Based' on the estimated value of direct investments ou'c,standing at the end of 1958, U.s. investments ($1.1 billion) accounted for some 34% of the total ($3.1 billion). Investments by Canada were valued at close to $1 billion. Investments by European countries accounted for another $0.9 billion, or 30% of the total. 6/' The study does not indicate whether this is a gross or net figure, ;;:".I bu.t balance of payments data suggest that it is "gross"'. -(,~,9 - By far the bulk of foreign investments were in utilities ($1.3 billion) dnd in manufacturing ($1.0 billion); together they amounted for three-fourths of the total. In addition to direct investment capital, Brazil has been receiving substantial amounts of suppliers credits. These have, accordi.ng to the same source cited above, averaged about $360 million in the five years 1954-58. The peak was reached in 1957 v,Then it amounted to ~416 million. In terms of dollars the value of outstanding foreign direct and port- folio investments in the private sector in India as of the end of 1959 was some '$1280 million. Of this $530 million or 41% was in manufacturing industry, $250 million qr 20% was in petroleum and the remaining $500 million tv-as in all other enterprises. Roughly five-sixths of such investments in the private sector were financed by private foreign capital and the remalnlng one-sixth by o~ficialc,~ources abroad, e.g. IBRD, Eximbank and DLF loans. The annual rate of gross foreign private capital inflows, including reinvested earnings, declined somewhat in the period 1956-59 from $66 million equivalent in 1956 to $54 million in 1959. The decline was sharper if net capital inflows are considered, viz. from $52 million in 1956 to $23 million in 1959. Roughly ,three-fifths of gross private investment flo1f-';;in 1956-59 were from the U"K. The share of U.S. capital was somevlhat lower than 30%. But since there ~las hardly any significant return flow of <~Gapi tal from India to the U.S., the latter's share in net 'capital exports 1.Jas much larger than the U.K., which exported only some $40 million net as against t148 million gross in that period. Changes in the pattern of f0!reign direct investment in Mexicd~ over the post-war period are note1rlOrthy. The average annual rate of flow of new direct investment capital plus inv'estments financed out of retained earnings of foreign direct investnlent ent~rprises was $109 million equivalent in 1954-58 as against $61 million in 1949-<53, i. e. an increase of over tTtJO- thirds. From the point of view of sectoral distribution of foreign private investments, the sharpest gains l-Tere recorded by manufacturing industry. The total investment in foreign controlled manufacturing enterprises rose 'by 160% from the ?pd of 1952 to the end of 1957 as compared with an increase of only 67% from 1947 to 1951. In both periods the percentage increase in investment in manufacturing was much higher than that for direct investments . as a whole - 73% in 1952-57 and 16% in-1947-5l • It is also interesting to note (that U.S. direct investments in Mexico , although still in excess of 80% of cthe value of all foreign direct invest- ments in Mexico '6y the end of 1959, rose by only 37% ,frGm "1952 to 1951, .' as compared with an increase of 44% in U.K. investment and a doubling of investment 1; all other countries. ., () -.::::::::- TABLE 1 U.S. : OUTFLOW OF PRIVATE LONG-TERM CAPITAL 1 1956 - 1960 \1 (in' $ million) 1956 1957 1958 1959 1960 1. Direct Investments, net 1859 2058 1094 1310 1541 .:::::) 2. Reinvested Earnings of Subsidiaries' 974 1363~: 9Lt5 1081 N.. A. 3. New Issues 453 597 955 624 547 4: Redemptions -174 -179 -85 -94 100 5. Other L6bg-Term net 324 441 574 372 306 Total 3436 4280 3483 3293 N.A. - Source: U.s. Department of Commerce, ,Survey of Current Business, June 1960 issue for 1956-58, data on items 1, 3, 4 and 5; and March 1961 issue for data ort sam~ items for 1959 and 1960. September 1960 issue for data on item 2. II • 8 .' :( ,~ ~', 0 C (.l 0 '>:J I'::. TABLE 2 Q o U.S • DIRECT n~VESTNENT CAPITAL FLOWS AND UNDISTRIBUTED SUBSIDIARY EARNINGS 1950 - 1959 (in $ million) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 fI .All Ar~as New capital 621 52B 850 721 664 779 1859 2482 1181 1439 Reinvested earni~gs 475 952 876 776 644 €98 1000 1363 945 10B1 1096 !.48O 1726 1308 1677 2859 3845 2126 2520 Total 1497 - Canada l'lew capital 287 240 420 367 385 300 .542 71B 421 409 Reinvested earnings 146 181 199 259 232 29 8 367 357 279 393 Total 433 c 421 619 646 617 59 8 909 1075 ..1E2 802 Western Euro'p"! New capital 119 62 -8 51 50 140 486 287 190 466 Reinvested earnings 151 181 174 173 198 219 204 '294 238 258 166 690 581 428 Total 212.. 24} - 224 248 359 724 Latin .America Net capital 40 166 277 117 88 193 592 1163 299 338 Reinvested earnings 109 249 303 152 125 192 241- 239 143 202 Total 149 415 580 269 .....?ll .2~ 833 1402 442 540 Other Area New capital 175 60 161 166 141 146 239 314 271 226 Reinvested earnings 69 341 200 192 89 189 188 473 285 228 J±gz Total fI --- -- 244 401 Pr~1iminary figures (, 36! -)~ ~ 335!;r 787 55£ 454 Source: U"So Department of Comm.eree~ ~~,..2f....~~_!_~u6.~E~' various issues. (~ - r\-;, '- l\ i~ (7 I{ ~. /1 i .) { ":< C\ TABLE ~ 0 U. S. DIRECT INVE.STMENT CAPITAL OUTFLOWS BY NAJaR ARbAS AND INDUSTRIES 1950·.. 1959 (excluding reinvested earnings) (in $ million) " Year All Areas Canada Western Euro:ee All Other -- .All Manu- All I-fanu- All Manu- All Manu- Indua- factur- Petro- }tin- Indus- factur- Petro- Min- Indus- factur- Petro- Min-Indus- factur- Petro- Min- ; , tries ing leum ing tries rag leum ing tries ing 1eum ing tries ing leum ~ , \ . 88 122 29 119 32 3 215 72