The Regulation of FDI in Latin America and the Caribbean: What Impact on Host Countries?

Abstract

Foreign direct investment (FDI) inflows have been an important capital source in Latin America over the past decades. This paper analyzes different regulation models for FDI in the region and discusses the factors which affect the choice of the level of regulation, e.g. the quality of the host country’s institutions, features of sectors which are destinations of FDI (natural resources, services or manufacturing) and motivations for FDI. Moreover, we address the issue of identifying a first-best regulatory framework in order to maximize benefits for the host country, in terms of attracting flows that contribute to development.