The impact of transportation investment, road transportation and telecommunications on FDI in Latin America 2008-2021

Abstract

In this paper, we examine the effects of logistic infrastructures as determinants of foreign investment in Latin America and the Caribbean from 2008 to 2021. We analyze the data using panel data and a feasible generalized least squares model. Our findings indicate that FDI tends to flow to countries with adequate transport and telecommunications infrastructure, although the availability of an electricity grid suitable for the needs of investors is the most significant factor in Latin America. We also determined that there is a limit beyond which investment in transportation infrastructure does not contribute to attracting foreign investment. Furthermore, our analysis shows that the region attracts FDI due to new market opportunities and lower production costs. We also find that the economic opening in Latin America discourages investment by neighboring investors, highlighting the importance of policies that balance foreign capital attraction with respect to international agreements with neighboring countries.