Harnessing Globalization: The Promotion of Nontraditional Foreign Direct Investment in Latin America

Conclusion

C O NC L U SI O N For governments seeking to develop their countries or states, globalization brings opportunities as well as dangers. On one hand, a government that reacts defensively, imposing excessively severe restrictions and controls on fdi, will miss out on opportunities to gain access to foreign capital, to provide jobs for its people, to diversify its economy, and to use linkages between tncs and local firms to spur on its industrialization process. On the other hand, a government that does nothing may find its country or state quickly falling behind in the fierce global competition for fdi, as lower-cost nations position themselves to attract this investment. Furthermore , although attracting fdi can play a significant role in a government’s effort to harness globalization, fdi alone—even nontraditional fdi—does not automatically promote development to its fullest extent. Thus proactive governments that can modify their policies and investment promotion strategies in anticipation of emerging global trends, that can enhance the capabilities of their people to absorb the benefits of fdi, and that can coordinate these activities into a coherent program will be the most successful at harnessing globalization for their own ends. In this book I have focused on an important aspect of harnessing globalization : the promotion of nontraditional fdi. This alone is a challenging task. Few investment promotion agencies (ipas), either government ipas or private ipas collaborating with governments, have all the characteristics needed to develop an effective investment promotion strategy. Even those that do to a significant degree, such as Singapore’s edb, can encounter serious difficulties as they seek to attract more knowledge-intensive, higher value-added fdi. My analysis has sought to establish the importance of political security, technocratic independence, and transnational learning capacity to the ability of an ipa—and by extension, the ability of a government—to develop an effective investment promotion strategy, a CONCLUSION  221 significant part of a government’s ability to attract nontraditional fdi. For a summary of how the model applies to each of the cases, see Table 16. As the case studies demonstrate, the ida and later ida Ireland in Ireland and Singapore’s edb—despite important differences—stand out as benchmark examples of ipas that have successfully attracted high levels of nontraditional fdi. Of the Latin American cases, cinde in Costa Rica clearly attracted the most nontraditional fdi, followed by Pólo in Rio Grande do Sul and corfo in Chile. Although the Britto government’s collaboration with Pólo was successful in attracting a major investment from Dell, Pólo’s investment promotion effort ended after Dutra took office. (The Dutra government itself attracted no further nontraditional fdi.) Although it has not yet attracted any single investment as large as Dell’s initial investment in Rio Grande do Sul, corfo’s investment promotion effort in Chile, sustained throughout the Lagos administration and continuing into the Bachelet government, has already attracted similar levels of nontraditional fdi overall and seems likely to far surpass Pólo’s achievement in Rio Grande do Sul over time. Theoretical Implications In this book I extend key theoretical concepts and develop new ones. Although I have expanded on existing concepts of political survival, transnational learning capacity is an entirely new concept, with roots in the literature on organizational learning. An Extension of an Existing Concept: Political Survival My notion of political security further develops previously created theoretical concepts of political survival. Geddes (1994) argues that when a leader ’s political position is not threatened and political party discipline is strong, he or she will be willing to delegate control over important policy areas to experts who can implement the best outcomes for the country. In contrast, when a leader’s political survival is endangered, he or she will retain control over policy for patrimonial purposes, using it as a source of patronage to bolster his or her political support. While discussing the circumstances under which leaders will delegate authority to technocratic agencies, Geddes’s primary focus is on the political conditions that permit legislatures to enact reforms that will enhance state capacity, enabling a government to avoid patrimonialism and implement broad developmental goals. Geddes maintains that in a democratic Table 16 Applying the model to the cases Case Variable Level of political security ipa’s technocratic independence Level of transnational learning capacity Level of effectiveness Level of nontraditional fdi attracted Costa...