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A note on foreign direct investment and industrial competitiveness in Brazil

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  • Regis Bonelli

Abstract

This paper addresses aspects of the links between capital inflows through foreign direct investment (FDI) and industrial competitiveness in Brazil. It provides an analysis of the two-way theoretical relationship between FDI and competitiveness, as well as some empirical evidence drawn from the Brazilian experience in the 1990s. Inflows of FDI to Brazil increased significantly during the 1990s. Although manufacturing has been losing out in terms of its share in total FDI, the stock of foreign capital in the manufacturing sector more than doubled (in current US dollars) between 1990 and 1996. In addition, rapid growth of manufacturing productivity has been amply documented, in the same period of time. There seems to exist, therefore, a prima facie case for supposing that foreign investment has contributed to increased productivity and competitiveness in Brazil. When looking at data within the manufacturing sector linking the growth of competitiveness (whether measured by unit labour costs or export performance) to FDI, however, there does not appear to be a clear-cut relationship with either the growth of FDI or the share of foreign capital within different industries. The relationship applies to some industries, but not to others. In other words, if one interpreted the causation as running in the opposite direction, this evidence would suggest that there is no general tendency for FDI to be attracted primarily to industries where competitiveness is improving most rapidly. This has the implication that rapid productivity growth might be the result of factors other than FDI as well—such as trade liberalization, for instance.

Suggested Citation

  • Regis Bonelli, 1999. "A note on foreign direct investment and industrial competitiveness in Brazil," Oxford Development Studies, Taylor & Francis Journals, vol. 27(3), pages 305-327.
    • Handle: RePEc:taf:oxdevs:v:27:y:1999:i:3:p:305-327
    DOI: 10.1080/13600819908424180
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    Cited by:

    1. Roberto Porzecanski & Kevin P. Gallagher, 2007. "Economic reform and foreign direct investment in Latin America," Progress in Development Studies, , vol. 7(3), pages 217-233, July.
    2. Florence Eid, 2003. "Foreign Direct Investment in The Arab World: Creating The Missing Link," Working Papers 0309, Economic Research Forum, revised Mar 2003.
    3. Werner Baer & David Fleischer (ed.), 2011. "The Economies of Argentina and Brazil," Books, Edward Elgar Publishing, number 14297.
    4. Bailey, Nicholas & Warby, Brian, 2019. "Explaining the competition for FDI: Evidence from Costa Rica and cross-national industry-level FDI data," Research in International Business and Finance, Elsevier, vol. 47(C), pages 67-77.
    5. Triches, Divanildo & Correa da Silveira, Eduarda Martins & Dias Samsonescu, Jorge Augusto, 2017. "The determinants of foreign direct investment in Brazil: empirical analysis for 2001-2013," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    6. Simão Davi Silber, 2011. "Foreign Trade and Foreign Investments: The Brazilian Experience in the Last Two Decades," Chapters, in: Werner Baer & David Fleischer (ed.), The Economies of Argentina and Brazil, chapter 23, Edward Elgar Publishing.

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