Analysis of Greenfield FDI from Latin America

More than 30 percent of global outward FDI flows originated from developing countries in 2013. However, studies analysing FDI flows from developing economies, especially from Latin America, are limited. This paper uses the fDi Markets database, a unique comprehensive dataset for bilateral greenfield FDI, and employs an augmented gravity model to analyse the determinants of greenfield FDI from Latin America between 2003 and 2013, the period when Latin American companies started to act globally. Due to the large number of zeros for FDI at the dyad level, a panel data selection correction approach based on Wooldridge (1995) is used. We find evidence that gravity variables are important determinants of capital investment flows and that outward greenfield FDI from Latin America is mainly driven by resource-seeking motives. We do not find evidence of market access being an important determinant for outward FDI.