Explaining FDI Flows in Latin America: The Return of Risk and the Returns on State Outlays.

This paper seeks to explain levels of FDI flows in 15 Latin American countries for a 20-year period. The authors, by utilizing a cross-sectional time-series model of FDI level, build on the literature that has found a wide array of explanations for flows of investment in the region (Biglaiser & DeRouen 2006; Montero 2008; Trevino et al 2002; Tuman & Emmert 2004). While these four recent studies employ similar methods for a similar time period, the results are wide-ranging and the findings are contradictory. We find support for several key explanations found in previous research, but we uncover a more nuanced understanding of FDI flows in the region. In the paper we argue that previous scholarship has not paid sufficient attention to the effects of different sorts of risk associated with respective domestic political situations. Specifically, the nature of political terror in the country influences investment decisions. Likewise, we argue that the influence of democracy becomes an important part of the explanation under certain conditions. As well, we argue that prior spending decisions and investments by states help to determine inflows of FDI in Latin America. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]