FOREIGN DIRECT INVESTMENT

Foreign Direct Investment

Foreign Direct Investment

Introduction

In order to understand the Foreign Direct Investment, the following main definitions are presented: i) IMF (International Monetary Fund): "FDI, occurs when a resident investor (" direct investor "), has objective of obtaining a lasting interest in an enterprise resident in another or national economy ("direct investment enterprise.") This participation will take the following two elements: 1) the long-term condition between the investor and the company, and 2) a significant degree of influence on the company and its management through a minimum shareholding of 10%.

ii) UNCTAD (United Nations Division for Trade and Development): "Foreign direct investment reflects the long-term interest of an entity resident in one economy (direct investor) in an entity resident in another economy (direct investment). It covers all transactions between investors direct and direct investment, which means it, covers not only the transaction initial but subsequent transactions between the two entities and the other affiliates.”

iii) WTO (World Trade Organization) "Foreign direct investment occurs when an investor established in a country (Source) acquires an asset in another country (destination) in order to administer it. The asset management dimension is what distinguishes FDI investment portfolio assets, bonds and other financial instruments. In most cases, the asset is managed abroad and signature of the business. When this happens, the investor is known as "parent" and the assets and 'Sharp' or 'subsidiary'.

iv) Multilateral Agency for Investment Guarantees (World Bank) "Foreign investment means acquiring long-term interests in a company that is operating in another country other than the investor. The purpose of the inverter is the have a participatory voice in the management of the company abroad”

The highest levels of internationalization of economies have experienced since the early 90's, possible reduction of barriers to trade and investments were made by ??the countries. This reduction of barriers has increased foreign investment flows and the impacts they generate flows in economies. As part of its growth strategy, countries design programs allow them to attract more foreign investment flows

Classification of foreign investment

Foreign investment may refer to the following two ways:

i) Direct investment is one that comes from a natural or legal person outside the capital is invested in a country with the intention of having direct involvement long-term development of a firm. This investment can be made ??by participation in other established companies or through the establishment of a subsidiary of the investing firm (Tolentino, 2000).

ii) Portfolio investment: the investment made ??through the market values, ie, by buying stocks, bonds and other financial can have fixed or variable returns. An example of this can be seen in the decision made ??by China in 1980 to implement the model "Special Economic Zones", in order to encourage the inflow of FDI into the country. The model consists of geographical areas where they apply to the exporting companies' favourable tax different from those prevailing in the rest of the country. This successful program along with other policies of opening to the outside, have been causing the arrival ...