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A Comparative Study of FDI in Brazil And China

Author: Marcos Chan
Tutor: XiaoHongRong
School: Central China Normal University
Course:
Keywords: foreign direct investment developing countries Brazil China
CLC: F832.6
Type: Master's thesis
Year: 2013
Downloads: 13
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Abstract

This study presents a comparison of foreign direct investments inflows in the Brazilian and Chinese economies, analyzing from the historical perspective the results of economic reforms that each country made in the past in order to attract foreign direct investments to its economies. It dedicates separated chapters for the analysis of Brazilian and Chinese foreign direct investment inflow, starting in the years of1980s until the year2012. This research covers not only the reforms promoted by each country to become an attractive place for foreign direct investments, but also analyze the data year by year to get a conclusion about each countries policy.The theory used in this study was the OLI framework of Dunning, which can be seen in chapter2. This theory’s premise argues that a multinational company has several disadvantages when entering in a foreign market, for example, communications costs, culture differences, limited knowledge about the local market, etc. Facing all this obstacles, the multinational company must at least see some potential advantages on its side to make a decision of business investment in the host country. According to Dunning, those advantages can be resumed in three categories:ownership, location and internalization.Chapter3presents a detailed review of foreign direct investments inflow in Brazil. It was organized by timeline perspective, starting with a brief introduction of Brazilian industrialization in the decade of1950. Moreover, it explains the macroeconomic problems which Brazil faced in the years of1980s and its effects in the inflow of international capital. Later, the reforms made by the government in the1990s, including the liberalization of Brazilian economy and the privatization program which boosted the investment into the country on the following years. It finishes with an analysis of impacts of the financial crisis of2008in the foreign direct investments into Brazil.The review in chapter4concerns to the Chinese foreign direct investments inflows, starting in the year of1979. The economic reform promoted by the Central Government of China was divided in5stages:experiment, growth, peak, adjustment and post-WTO stages. It also discusses the distribution of foreign direct investments in China per region, explanations about the Chinese market size, infrastructure, policies and impacts. In the last part, it presents the effects the global financial crisis of2008in the international investment inflow into China.The conclusion shows that these two countries have different patterns of foreign direct investment policy and that China has larger inflows than Brazil. Moreover, indicates the possible problems that may negatively influence the inflow of investments into Brazil, and finally propose suggestions for future governments to make economic policies more efficient.

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