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The Servicing of Foreign Capital Inflows by Under-Developed Countries

In: Economic Development for Latin America

Author

Listed:
  • Gerald M. Alter

    (International Bank for Reconstruction and Development)

Abstract

An under-developed country wishing to secure foreign capital to accelerate its economic development faces various tests by potential investors. These tests — whether they relate to the likelihood of war, revolution, civil strife, expropriation without compensation, the availability of suitable investment projects, or the future balance of payments position of the country — stem from the fact that the ordinary investor expects to receive a return on the funds committed to a country. The entity receiving such funds, if it is a private enterprise or a public corporation operating along business lines, is willing to pay the required return when the use of such funds in a specific project is expected to yield the required surplus over cost directly. If the receiving entity is the government, a specific project may or may not be expected to yield the required surplus over cost directly. The government requires, however, that the overall yield to the whole economy from employing the funds should in some sense justify payment of the return required by the investor.

Suggested Citation

  • Gerald M. Alter, 1961. "The Servicing of Foreign Capital Inflows by Under-Developed Countries," International Economic Association Series, in: Howard S. Ellis (ed.), Economic Development for Latin America, chapter 0, pages 139-167, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-08449-4_6
    DOI: 10.1007/978-1-349-08449-4_6
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