FDI attractiveness in Latin America

This paper focuses on the identification of the variables determining the attractiveness of foreign direct investment in Latin America, represented by 17 countries over a period of time from 1996 to 2011. It considers variables traditionally not taken into account, such as the tax rate and institutional factors, which have revealed important explanatory variables also traditionally considered as GDP, inflation, population, the share of GDP by sector, the income level, etc. According to the analysis in this paper and the results obtained, it is very clear that institutional factors such as the size of the economy and the population have an influence in attracting FDI flows. The institutional quality is determinative for the attraction of foreign direct investment to these countries. Property rights, monetary freedom and investment freedom, are institutional indicators of great relevance as explanatory factors for attracting foreign direct investment, while government expenditures follows to a lesser degree.