Foreign Direct Investment in Latin America: An Analysis of its Characteristics and Efficacy :: Essays Papers

Foreign Direct Investment in Latin America An digest of its Characteristics and EfficacyINTRODUCTIONForeign Direct Investment, or FDI, is defined as an investment made by a foreign person or organization in a particular country (http//www.encarta.com). In the 1990s, FDI became constitutional to the growth of Latin America. Traditionally, flows of FDI have constituted a small character of the resources flowing to ontogeny countries (UNESCAP, 162). However, this characteristic changed in the 1990s when the share of FDI to developing nations rose from 12.7% in1990 to 41.5% in 1997. Proponents of FDI, point to its ability to foster technical conception in the host country as well as its list to increase usage. Critics of FDI claim that it has increased lesser-developed nations dependence on foreign slap-up pushing them further into debt. In this paper I plan to search both sides of this issue as well as the particular characteristics of FDI flows into Latin America. FDI G OOD?The theory behind attracting FDI in developing countries is quite simple. Supposedly, FDI facilitates technological transfer and encourages more efficient management practices (Fernandez, 12). This assumption is based upon the absolute economic theory that with technological transfer and innovation, these advances will filter into other(a) areas of the economy. This is known as spillover effects. Foreign Direct Investment generates employment in the short-term by inundating the market with financial capital that essential be maintained through labor. This can counteract the impact of the uniform business cycle on the labor market (UNESCAP, 184). FDI can excessively improve the productivity of the rest of the economy. This has been especially true when FDI has been applied to the privatization of previously state-owned public enterprises. The result is greater efficiency and greater supply of work and products (UNESCAP, 185). During the 1990s, many state-owned ent erprises were privatized, resulting in the generation of massive amounts of financial capital. The largest such putsch was that of Aueropuertos Argentina by firms from the United States and Italy worth a total of $5,134 meg (USD) (UNESCAP, 175). FDI BAD?Firms invest in other countries in the interest of gaining a stable long-term role in the management of the enterprise where the pecuniary resource are invested (UNESCAP, 162). Therefore, FDI can imply long-term foreign ownership and soften over domestic firms.