This analysis considers whether spatial interdependence is an important determinant of foreign direct investment (FDI) in Latin America. Two types of spatial interdependence are explored: 1) surrounding market potential and 2) spatial autocorrelation of FDI. Using a sample of 17 Latin American countries, with observations from 1986 to 2006, we find that spatial interdependence matters for world net FDI in the region. Surrounding market potential has a positive effect on FDI of significant magnitude, but there is no evidence that FDI is spatially autocorrelated. Other contributors to FDI in this analysis include governance, specifically control of corruption, and exports of raw materials. We find differences in contributors to American FDI in the region. When considering only American FDI, we find that FDI is spatially autocorrelated, and that surrounding market potential is not significant when the spatially lagged dependent variable is included in the model.
Blanco, Luisa, "The impact of spatial interdependence on FDI in Latin America" (2011). Pepperdine University, School of Public Policy Working Papers. Paper 27.