Macroeconomic antecedents to U.S. investment in Latin America

The last decade witnessed a significant increase in the flows of foreign direct investment (FDI) into developing countries, particularly in Latin America. This increase is likely to continue as multinational corporations look for new markets and profitable opportunities to serve or produce abroad. The growth of FDI in the region calls for a search of the different antecedents of U.S. FDI inflows into Latin America. Knowing the different antecedents of FDI in the region is beneficial at a time a diversity of trade agreements are taking place while others wait for official signatures. A movement towards bilateral and multilateral trade agreements includes the U.S. The U.S. has come to play an important role in terms of expanding the horizon of what would constitute the free trade area of the Americas (FTAA). This study investigates the antecedents of U.S. FDI into Latin American countries, while paying special attention to the relationship between trade agreements and FDI inflows. This study also investigates concern for the foreign exchange market as a source of uncertainty to FDI. The empirical investigation uses a fixed effects panel data model to maximize degrees of freedom and to control for cross-country and inter-temporal heterogeneity.