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This Working Paper[1] is the result of a case study conducted in Brazil which analysed the impact on development of certain foreign investments in the oil, electricity distribution, automotive, and tourism sectors.[2] The study uses the Elcano Royal Institute’s Foreign Direct Investment (FDI-D) analytical framework, to which recourse is made in the second section to explain the rationale underlying the Brazilian government’s local-content policy. Subsequent sections explain the actual impact achieved on the sectors analysed in the case study, classifying them according to the framework’s categories:

(1) Structural change
(2) Improvement in the provision of private goods and services
(3) Improvement in the provision of public goods and services
(4) Improvement of the employment structure
(5) Equilibrium of balance of payments

The case study commenced with an initial phase in which the factors determining the country’s institutional and economic framework were analysed, making use of primary and secondary sources. In this phase, information was also collected from sector reports on development mechanisms and trends at the national level. Subsequently, in fieldwork started in December 2011 and completed in March 2012, information on the model’s variables was gathered in semi-structured interviews with key informants from business and government, as well as with specialist researchers from the appropriate fields at universities and think tanks across the country. Fieldwork involved interviewing representatives of both Cooperación Española (Spanish Cooperation) and the Spanish Embassy and its Trade Office, meanwhile analysing the possibility of aligning Spanish foreign policy with Brazil’s development strategies on the basis of mutually beneficial investments.

This case study, along with similar studies conducted in the Dominican Republic and Bolivia, is part of a project initiated in 2009 with the ultimate goal of improving our understanding of the factors that determine the impact of foreign investment on development in such a way that they can be modified through effective development policies in the countries of destination. This should generate knowledge that might also be useful in the countries where investment originates under the dual aim of aiding development and supporting the internationalisation of businesses.[3]

Aitor Pérez, Associate Analyst at the Elcano Royal Institute

[1] English version of ‘Inversión extranjera sí, pero con contenido local: estrategias de desarrollo en Brasil’ (DT 7/2012, Real Instituto Elcano), originally published on 31 May 2012.

[2] These four sectors have received significant foreign investments, in particular Spanish investment. Among the Spanish companies with sizeable operations in these sectors are Repsol, Endesa, Iberdrola, Cie Automotive, Grupo Mondragón, Iberostar, and Melia.

[3] This project was made possible thanks to the cooperation and funding of the Spanish Ministry of Foreign Affairs and Cooperation (MAEC).