Foreign Direct Investment ( Fdi ) Essay

What impact will the prospect of deprivatization have on investment by managers of privatized firms?

FDI appears when a commonly expanding or growing company is investing to a foreign country. FDI consists of the acquisition or creation of assets (e.g. firm equity, land, houses, oil-drilling rigs and etc.) undertaken by foreigners. Initial investment or ownership of the foreign equity has to be more than 10% but does not need to be a 100%. Anything less than 10% of the ownership will be called portfolio investment. Company which invests in foreign markets become a multinational enterprise (MNE).

Countries would participate in foreign direct investments because it helps in the economic development of the country where the investment is being made. They also engage in FDI to reduce production costs.

This is a result from the economy being built upon neoliberalism ideology and a free market economy, while being infused with socialist and capitalist principles. Aspects of neoliberalism include a reliance on local and global free markets, with the state maintaining a minimal role of the political economy. In fact, based on the 2014 Index of Economic Freedom, Chile has the 7th freest market in the entire world, ranking ahead of even the United States. These aspects are evident in the Chilean government’s approach to the economy, as they favor foreign investment and international trade. One way in which the Chilean government has attempted to increase the amount of foreign investment is through their privatization of Chilean ports, waste-water treatment facilities and private investment in the construction and operation of domestic infrastructure. The Chilean government chooses to have a limited role in the regulation of the economy, with the only heavily regulated aspects consisting of utilities, the banking system, security markets and pension funds. These free market principles of Chile can be seen as very capitalistic, this is due to the fact that much of the economic suffering during Allende’s rule was because of his socialist policies. A large part of Chile’s economic success is a result of their willingness to participate in capitalistic means. They are a very favorable foreign investment, considering how supportive the government is of foreign investment, which happens to be the basis that the economy thrives on. Foreign countries feel confident in their investments in Chile due to the stability and the easy going nature of the government. Countries such as the United States, Canada, Mexico, along with the rest of South America, are some of the biggest exporters of Chilean

To begin describing how has been the growth and progress of FDI in Mexico it is important to define FDI itself. According to the OECD Economic Outlook of 2003, Foreign Direct Investment is “an activity in which an investor resident in one country obtains a lasting interest in, and a significant influence on the management of, an entity resident in another country. This may involve either creating an entirely new enterprise or, more typically, changing the ownership of existing enterprises (via mergers and acquisitions)” (157).

Chile has become a market-oriented economy characterized by high levels of foreign trade, strong financial institutions and sound policy that have given it the strongest sovereign rating in South America. Over the last decade, FDI has represented an annual average of over 6 percent of Chile’s GDP. Exports of goods and services accounted for approximately one-third of GDP, with commodities making up three-quarters of total exports. Copper provides 19% of government revenues. The mining sector attracts 50.1 % of implemented FDI under DL600, followed by services (26.6 %); electricity, gas and water (10.9 %); manufacturing (7.9 %); construction (2.4 %); transportation and communications (1.7 %); and agriculture and fishing (0.5 %). According to

Latin America may therefore include FDI as a key component of their modernization strategy, because of the potential benefits FDI is likely to generate to their economies. In particular, Latin American

Chile’s main export Partners are China and US. The most important industry in Chile is the mining industry. Just copper alone provides 19% of government revenue. FDI is an important indicator to measure economic development in Chile. FDI in Chile has

Chile presents a promising investment opportunity for Canadian companies. With a strong and stable business environment, established political connections, and improving social structure, Chile is positioned as a growing economy ripe for foreign investment.

Foreign direct investment by multinational corporations is the action of obtaining controlling equity share of a firm in a foreign country. There has been many discussions about the role of FDI in affecting a country’s unemployment rate and economic growth. Of which many believed

Some leading scholars argued that the existence of national laws and policies has significantly determined the extent to which a country's success or failure to benefit from trade and investment agreements. Hernando De Soto (2000) claimed that formalities and inefficiencies in the legal systems of developing countries have made them fail to enjoy the benefits of capitalism. Trubek (2006) then identified how legal cultures of developing countries were highly ‘formalist’, leading to weak enforcement, inappropriate rules, and low legitimacy. Abeysinghe (2014) then showed how national laws are more influential than international laws in trade in services by stating that trade in services’ agreements mainly deal with ‘behind the border’

Foreign direct investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company. Foreign direct investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies. The key feature of foreign direct investment is that it is an investment made that establishes either effective control of, or at least substantial influence over, the decision making of a foreign business.

Allan’s bistro is one of the premier roasters and retailers of coffee and coffee products in the USA. Founded by Allan smith in the 1950’s in the USA, it has become well acknowledged for its great quality of coffee, genuine service and expertly brewed coffee from the best coffee beans on the market worldwide. Due to increased competition in the coffee industry today, it has become necessary for Allan’s bistro to expand, increase market share and build up and even stronger reputation. This need has led Allan’s bistro to broaden its reach into developing economies in search of more opportunities for trade and/or investment. For this, Rwanda seems to be a desirable choice.

Foreign direct investment has many forms. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra-company loans".

Trade plays a key role in stimulating economies. It promotes sustainable economic growth and development. However, for this to happen there needs to be openness. This paper is going to discuss how increasing the level of openness of developing nations can lead to increased economic growth. The paper will also review some of the dynamic gains that can be made from trade before concluding with a discussion of the roles of global trade organizations in promoting economic development. These discussions will be supported with examples of nations that have excelled in the various aspects that will be discussed.