Openness and Foreign Direct Investment: The Role of Free Trade Agreements in Latin America
AbstractThis paper sheds lights the on the performance of Latin American governments in attracting foreign direct investment (FDI) through trade policies, specifically by signing free trade agreements with other countries. The relationship between FDI and trade for Latin America has previously been analyzed. In these studies, the relationship between the degree of “openness” (imports plus exports divided by the domestic product) and FDI has not been conclusive. At the same time, the effect of specific trade policies on FDI flows has not been extensively studied. Some state policies on trade could produce a significant impact in attracting FDI. Specifically, through the implementation of several free trade agreements, several Latin American countries have been able to attract greater flows of foreign direct investment. The implementation of these free trade agreements was part of a more general plan of economic reforms that Latin American countries launched since the mid-1980s. The goals of these reforms were to adjust their economies and improve their competitiveness by liberalizing trade, privatizing, and deregulating their markets. Those countries that signed more free trade agreements – or signed them with the largest economies in the world –increased their effectiveness in attracting FDI. I test the impact of this policy on the behavior of FDI flows through a panel data model for seventeen Latin American countries and for the period ranging from 1985 to 2003.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 4187.
Date of creation: 01 Oct 2006
Date of revision: 01 Jul 2007
free trade agreements; foreign direct investment; Latin America;
Find related papers by JEL classification:
- F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Motta, Massimo & Norman, George, 1996.
"Does Economic Integration Cause Foreign Direct Investment?,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-83, November.
- Massimo Motta & George Norman, 1993. "Does economic integration cause foreign direct investment?," Economics Working Papers 28, Department of Economics and Business, Universitat Pompeu Fabra.
- J Peter Neary, 2001.
"Foreign Direct Iinvestment and the Single Market,"
200124, School Of Economics, University College Dublin.
- Raff, Horst, 2004.
"Preferential trade agreements and tax competition for foreign direct investment,"
Journal of Public Economics,
Elsevier, vol. 88(12), pages 2745-2763, December.
- Horst Raff, 2002. "Preferential Trade Agreements and Tax Competition for Foreign Direct Investment," CESifo Working Paper Series 763, CESifo Group Munich.
- Linda Goldberg & Joseph Tracy, 2001.
"Exchange Rates and Wages,"
NBER Working Papers
8137, National Bureau of Economic Research, Inc.
- Narula, Rajneesh & Wakelin, Katharine, 1998.
"Technological competitiveness, trade and foreign direct investment,"
Structural Change and Economic Dynamics,
Elsevier, vol. 9(3), pages 373-387, September.
- Narula ,Rajneesh & Wakelin ,Katharine, 1995. "Technological competitiveness, trade and foreign direct investment," Research Memorandum 013, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
- Shabtai Donnenfeld, 2003. "Regional Blocs and Foreign Direct Investment," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 770-788, November.
- Haufler, Andreas & Wooton, Ian, 1999.
"Country size and tax competition for foreign direct investment,"
Munich Reprints in Economics
20408, University of Munich, Department of Economics.
- Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, vol. 71(1), pages 121-139, January.
- Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
- Blomström, Magnus & Kokko, Ari, 1997.
"Regional Integration and Foreign Direct Investment,"
CEPR Discussion Papers
1659, C.E.P.R. Discussion Papers.
- Magnus Blomstrom & Ari Kokko, 1997. "Regional Integration and Foreign Direct Investment," NBER Working Papers 6019, National Bureau of Economic Research, Inc.
- Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," Working Paper Series in Economics and Finance 172, Stockholm School of Economics.
- John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan, vol. 11(1), pages 9-31, March.
- Guillermo A. Calvo & Morris Goldstein & Eduard Hochreiter (ed.), 1996. "Private Capital Flows to Emerging Markets after the Mexican Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 49.
- Lionel Fontagné, 1999. "Foreign Direct Investment and International Trade: Complements or Substitutes?," OECD Science, Technology and Industry Working Papers 1999/3, OECD Publishing.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.