Paper Topic:

Foreign Direct Investment in Brazil:Trends and determinants (from 1995 to 2007)

NAME

COURSE

TUTOR

DATE

FOREIGN DIRECT INVESTMENT IN BRAZIL : TRENDS AND DETERMINANTS (FROM 1990 TO 2007

Introduction

For a country to achieve economic growth and sustained development factors of production must be available and combined such that they realize optimal production in the economy , political atmosphere should create an enabling environment that promote economic activities and infrastructure such as transportation and communication should be available to ensure low cost of production and accessibility to the market . One major limitation in developing countries is lack of one or

br more factors of production and /or poor utilization of available resources . Capital and technology are some of the major obstacles that inhibit production and growth in many developing countries (Economist .com , 2008 Jains , 2006

In light of globalization and internationalization of trade , foreign direct investment (FDI ) is acting as one of the most significant drivers towards development in many economies by stimulating growth especially in developing countries . One developing economy that is a beneficiary of FDI is Brazil . From 1994 to date Brazil being a developing nation has implemented policies that are geared towards attracting foreign investors as a source of capital formation which strengthens their balance of payment position and acts as investment , transfer of technology to domestic country hence increase output /input ratio hence income , increased competitiveness of the country hence boost foreign earnings and create employment (Motta Veiga , 2004 Jains , 2006

This is a discussion that explains the fluctuation of FDI in Brazil from 1990 to 2007 in attempt highlight the reasons and determinants that increase or decrease the rate of capital inflow in an economy through foreign direct investment

FDI in Brazil 1990 - 2007 : Trend analysis

Prior to 1988 , Brazil as an economy had suffered due to military regime which inhibited free trade and generally all aspects of economic growth in the country . In 1988 , a civilian president was democratically elected and this paved way for laying structures and policy that facilitated the jump starting of the economy since resources were redirected towards agricultural and industrial growth and economic development (Spillan Ziemnovicw , 2005 . However , in early 1990 's Brazil was still marred with inherited economic problems from the past with inflation being close to 3000 , high unemployment , high taxes and a tight fiscal policy that made the country unattractive for foreign investment among other socio-economic problems (Economist .com , 2008

However , despite its economic problems in early 90 's , certain fundamental factors made Brazil one of the most potential economies that could benefit from FDI . Firstly , Brazil 's natural resource base is vast from agriculture to minerals and has a relatively lower cost of labour these features made the economy ideal for multinational enterprises since they could produce cheaply and hence giving Brazil competitive advantage over United States and Europe . Secondly , Brazil is a large economy with over 180 million citizens who can provide market and labour , therefore , in light of the ailing domestic industries , MNE 's could easily penetrate the market and produce cheaply and efficiently to capture...

5 pages

40.0 KB

Free sing-up