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Foreign Direct Investment in Mexico during the 1990s: An Empirical Assessment


  • Miguel D. Ramirez

    () (Department of Economics, Trinity College)


This paper examines the major economic and institutional factors underlying the surge in foreign direct investment (FDI) flows to Mexico during the 1990s. It presents evidence that indicates that market-friendly economic reforms and major changes in the institutional-legal status of foreign capital are, in large measure, responsible for the rapid increase in FDI inflows to leading sectors of the Mexican economy. The econometric results presented in the paper suggest that market size, the real exchange rate, and institutional reforms such as the elimination of restrictions on profit and dividend remittances and the implementation of a selective debt conversion program are economically significant in explaining the variation in FDI inflows to the country. Finally the paper addresses the long-term negative effects that rapidly growing profit and dividend remittances may have on the financing of capital formation and the Mexican balance of payments.

Suggested Citation

  • Miguel D. Ramirez, 2002. "Foreign Direct Investment in Mexico during the 1990s: An Empirical Assessment," Eastern Economic Journal, Eastern Economic Association, vol. 28(3), pages 409-423, Summer.
  • Handle: RePEc:eej:eeconj:v:28:y:2002:i:3:p:409-423

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    References listed on IDEAS

    1. Figueroa, Adolfo, 1998. "Equity, Foreign Investment and International Competitiveness in Latin America," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 1), pages 391-408.
    2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    3. Blomstrom, Magnus & Wolff, E.N., 1989. "Multinational Corporations And Productivity Convergence In Mexico," Working Papers 89-28, C.V. Starr Center for Applied Economics, New York University.
    4. Kevin Honglin Zhang, 2001. "What Attracts Foreign Multinational Corporations To China?," Contemporary Economic Policy, Western Economic Association International, vol. 19(3), pages 336-346, July.
    5. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
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    Cited by:

    1. Ibarra, Carlos A., 2011. "Capital Flows and Real Exchange Rate Appreciation in Mexico," World Development, Elsevier, vol. 39(12), pages 2080-2090.
    2. Javalgi, Rajshekhar (Raj) G. & Deligonul, Seyda & Ghosh, Amit K. & Lambert, Douglas M. & Cavusgil, S. Tamer, 2010. "Foreign market entry mode behavior as a gateway to further entries: The NAFTA experience," International Business Review, Elsevier, vol. 19(3), pages 209-222, June.
    3. Jordaan, Jacob A., 2008. "Intra- and Inter-industry Externalities from Foreign Direct Investment in the Mexican Manufacturing Sector: New Evidence from Mexican Regions," World Development, Elsevier, vol. 36(12), pages 2838-2854, December.
    4. repec:spr:manint:v:48:y:2008:i:2:d:10.1007_s11575-008-0009-9 is not listed on IDEAS
    5. Ramirez, Miguel D., 2003. "Mexico under NAFTA: a critical assessment," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(5), pages 863-892.

    More about this item


    Foreign Direct Investment;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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