DC Accepted Papers Paper:
What Drives China's Presence in LATAM? an Empirical Analysis of Chinese FDI in Latin America
*Names in bold indicate Presenter
But also, the rise of China as a global investor is creating strains on the established international financial order. FDI, in particular, plays a significant role in shaping the relationship between the developed and the developing world, as investment from developed countries flows towards emerging markets with stronger institutions and increased levels of democracy. Combined with the standards that multilateral financial organizations have set since Bretton Woods, developing countries have historically faced important incentives to improve their institutions, by lowering corruption and strengthening the rule of law, to attract more capital. In this sense, this paper aims to answer the following question; (2) to what degree does Chinese investment in LAC finance less democratic countries unable to access traditional international markets? Here, I examine the effect that the level of democracy and civil liberties has on the amount of investment coming from China. As China rises as the last resort of financial assistance for undemocratic countries, this could have significant repercussion on the global order and, in particular, on reshaping the role that the United States have played since the post-cold war.
To put these assumptions to the test and fill the gap in the literature, this paper uses annual investment figures at the host country and sector level from 2005 to 2018 to examine the determinants that explain Chinese investment decision-making in Latin America’s countries.