Determinants of Foreign Direct Investment in Brazil

The role of Foreign Direct Investment (FDI) in the Brazilian economy has become increasingly important over the last decades. Still, the distribution of the investment projects across the Brazilian federation units demonstrated significant heterogeneity. The purpose of this work is to investigate the determinants for the allocation of foreign direct investment across Brazilian states. To achieve this goal is made a literature review on the economic theories developed over foreign direct investment (FDI) and on the empirical literature on the locational determinants for FDI. Additionally, is assessed the role of foreign investment in the development of the Brazilian economy focusing on the industrialization process and the distribution across sectors, investor country, and regional distribution. Then, the determinants found in the literature are evaluated through a discrete econometric model, applying the conditional logistic regression to an investment-level database for greenfield projects across Brazilian states from 2003 to 2018, highlighting the differences in the determinants among the industry sector of investing companies.