Econ 161-Lecture 11

Econ 161-Lecture 11 - GlobalIntegrationofLatinAmerica...

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Unformatted text preview: GlobalIntegrationofLatinAmerica Lecture11 c Marc-AndreasMuendler UniversityofCalifornia,SanDiego May10,2011 11.ForeignDirectInvestmentandIncome Econ161, c M.Muendler CapitalFlowsintoLatinAmerica Capitalflowscancreategainsandincreaseproductivitybytransfer- ringresourcesfromless-productiveusestomore-productiveusesin LatinAmericaandotherdevelopingcountries. Capitalflowscanbeclassifiedbydurationofinvestment(maturity) Short-term capitalstaysinacountryforlessthanoneyear Long-term capitalstaysforoneyearorlonger 11.ForeignDirectInvestmentandIncome Econ161, c M.Muendler CapitalFlowsintoLatinAmerica Short-termcapital includesinvestmentsinbondsandcurrency morevolatilethanlong-termcapitalflows (sometimesheldforspeculativepurposes) Long-termcapital includesforeigndirectinvestment(FDI),equityandbonds mostsensitivetoinfrastructureandinstitutions(regulation,oversight) oftenfacilitatedthroughmultinationalcorporations(MNCs) 11.ForeignDirectInvestmentandIncome Econ161, c M.Muendler SourcesofCurrentAccountFinancing Equityflows:FDIandportfolioinvestments FDI:Influenceonthemanagement;Portfolioinvestments:Diversification Debtflows:Privateandofficialcreditors Officialcreditors:WorldBank,IMF,others;Privatecreditors:Bonds,banks,others Changesinreserves Currencyinterventionsbymonetaryauthorities Grants (Bilateralaid,technicalcooperation) Workersremittances 11.ForeignDirectInvestmentandIncome Econ161, c M.Muendler CurrentAccountFinancinginLatinAmerica B i l l io n s o f c u r r e n t U S $-100-50 50 100 Net Equity Flows: Non-FDI Net Debt Flows: Private Net Debt Flows: Official Net Equity Flows: FDI Balancing Item Change in Reserves 1997 1998 1999 2000 2001 2002 2003 Inflows Outflows Source :WorldBank, GlobalDevelopmentFinance ,2004 11.ForeignDirectInvestmentandIncome Econ161, c M.Muendler ForeignDirectInvestment Foreigndirectinvestment(FDI):Investmentreflectinglastingeco- nomicinterestandcontrolofaforeignenterprise TypesofFDIcapital Equitycapital:investorspurchaseofshares Retainedandreinvestedprofits:investorsshareofprofitsnotremitted Intra-companyloans:additionalloansbetweeninvestorandforeignenterprise Non-equityformsofcollaboration. Subcontracting,managementcontracts,licensing(royaltiesandfees) 11.ForeignDirectInvestmentandIncome Econ161, c M.Muendler FDIversusOffshoreOutsourcing Foreigndirectinvestment(FDI) Internationalcapitalflowstoforeignsubsidiaries Transferofresources and acquisitionofcontrol Cross-borderoutsourcingtoindependentforeignfirms Internationalcontractualarrangementswithindependentfirms Nodirectcontrol,likelyretentionofresourcesandcoreactivities atheadquarters 11.ForeignDirectInvestmentandIncome Econ161, c M.Muendler ForeignDirectInvestmentinLatinAmerica LatinAmericaisamajordestinationforForeignDirectInvestments In2000,BrazilrankedsecondonlytoChinaamongdevelopingcountries. In2001,MexicorankedsecondonlytoChina(UNCTAD)...
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This note was uploaded on 08/14/2011 for the course ECON 161 taught by Professor Muendler during the Spring '11 term at San Diego.

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Econ 161-Lecture 11 - GlobalIntegrationofLatinAmerica...

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