CIAO DATE: 06/05

El TLCAN y la Inversióon Extranjera Directa: El Nuevo Escenario

Abstract

This working paper looks at the changes that have taken place in North America in foreign direct investment (FDI) after NAFTA. The first part analyses the regime defined in the treaty. The main four principles of this regime are: 1) "national treatment", 2) the prohibition of performance requirements for investors, 3) a more liberal norm for foreign ownership of firms, 4) institutional procedures for the solution of disputes. The rule of origin is identified as the most important measure for non-North American investors. The second part offers an empirical evaluation of changes in FDI flows during the first five years of NAFTA. It compares that period with the five years previous to the implementation of the agreement. The findings show a significant increase in FDI going to Mexico, Canada and the United States. At the same time, there have been changes in the distribution of these flows within the region. More FDI is going now to the United States than to Mexico, and investments between Canada and the U.S. are growing at a higher rate than those between Mexico and the U.S. The paper also identifies different patterns between Mexico and Canada. The increases in Canadian investments suggests that Canadian multinationals are adapting their strategies to the new conditions created by NAFTA.

Full Text (PDF, 37 pages, 2.18 MB)