Foreign Investors Buy Stakes in US

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the Boston Globe

Foreign Investors Buy Stakes in US

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NEW YORK - In May, a Saudi Arabian conglomerate bought a Massachusetts plastics maker. In November, a French company established a new factory in Adrian, Mich., adding 189 automotive jobs to an area accustomed to layoffs. In December, a British company bought a New Jersey maker of cough syrup.

For much of the world, the United States is now on sale at discount prices.

With credit tight, unemployment growing, and worries mounting about a potential recession, American business and government leaders are courting foreign money to keep the economy growing. Foreign investors are buying aggressively, taking advantage of American duress and a weak dollar to snap up what many see as bargains, while making inroads into the world's largest market.

Last year, foreign investors poured a record $414 billion into securing stakes in American companies, factories, and other properties through private deals and purchases of publicly traded stock, according to Thomson Financial, a research firm. That was up 90 percent from the previous year and more than double the average for the past decade. It amounted to more than one-fourth of all announced deals for the year, Thomson said.

During the first two weeks of this year, foreign businesses agreed to invest another $22.6 billion for stakes in American companies - more than half the value of all announced deals. If a recession now unfolds and the dollar drops further, the pace could accelerate, economists say.

The surge of foreign money has injected fresh tension into a running debate about America's place in the global economy. It has supplied state governors with a new development strategy - attracting foreign money. And it has reinvigorated sometimes jingoistic worries about foreigners securing control of America's fortunes, a narrative last heard in the 1980s as Hondas proliferated and Rockefeller Center landed in Japanese hands.

With a growing share of investment coming from so-called sovereign wealth funds - vast pools of money controlled by governments from China to the Middle East - lawmakers and regulators are calling for greater scrutiny to ensure that foreign countries do not gain influence over the financial system or military-related technology. On the presidential campaign trail, the Democratic candidates have begun to focus on these foreign funds, calling for international rules that would make them more transparent.

Debate is swirling in Washington about the best way to stimulate a flagging economy. Despite divided opinion about the merits, foreign investment may be preventing deeper troubles by infusing hard-luck companies with cash and keeping some in business.

The most conspicuous beneficiaries are Wall Street banks like Merrill Lynch, Citigroup, and Morgan Stanley, which have sold stakes to government-controlled funds in Asia and the Middle East to compensate for calamitous losses on mortgage markets. Beneath the headlines, a more profound shift is underway: Foreign entities last year captured stakes in American companies in businesses as diverse as real estate, steel-making, energy, and baby food.

Five million Americans now work for foreign companies set up in the United States, and those jobs pay 30 percent more than similar work at domestic companies, said Deputy Treasury Secretary Robert M. Kimmitt.

© Copyright 2008 The New York Times Company

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