Welcoming Foreign Direct Investment? A Political Economy Approach to FDI Policies in Argentina and Brazil

The purpose of this presentation is to develop a framework that enables us to discern the political economy determinants of FDI openness in emerging economies that received large flows of FDI during the past 15 years. Even tough the political economy field is recently thriving with contributions that help us understand the multidisciplinary aspects of foreign investment, our comprehension level is still behind that of international trade. This opens up the door for exciting research opportunities but it also constitutes a tremendous challenge. While the current literature has focused on the “ex-ante” political and economic conditions that can propel FDI openness, it has not considered the extent to which foreign investment, through its impact on the relative price of the domestic factors of production and on the market structure, can stimulate changes in the design of FDI policies. In addition, specific features of emerging economies have not been sufficiently explored in their relationship with FDI. This study seeks to fill in these gaps by using the specific cases of Argentina and Brazil.