Foreign Direct Investment and Its Performance in Colombia,1994 – 2014

Abstract

Foreign direct investment (FDI) flows are one of the components of globalization that have growing acceptance in most world economies. In this paper we explore the determinants of foreign capital allocation by private investors and multinational companies. A data panel regression analysis is carried out with 21 years of data from 167 countries. The results are then compared to the performance indicators of Colombia, an economy in which fdi increased ten times in one decade. We conclude that every factor that determines fdi worldwide had a positive performance in Colombia, thus the success of its foreign investment attraction. However, the concentration of these investments in traditional extractive sectors raises a challenge to diversify FDI by sectors in order to attain a higher impact and sustainability in both knowledge transference and regional development.