Competition between Latin America and China for US Direct Investment

There is a belief that the Chinese economy competes with the Latin-American ones for investment flows. Here we analyze the determinants of the US FDI outflows to the most representative Latin-American economies. We develop such assessments with a double-procedure cointegration analysis based on the time-series methodologies of Toda and Yamamoto (1995) and Liu, Song and Romilly (1997). The results suggest that long-run investment to the Latin-American region mainly depends on the performance of the US economy. Furthermore, they suggest the existence of a substitution effect between the Latin American countries and China for US investment flows.