German direct investment in Latin America: striking peculiarities, unfounded fears, and neglected issues

Abstract

Foreign direct investment (FDI) of Germany in Latin America reveals various peculiarities that may shape future investment relations. However, two major concerns are largely unfounded: - In contrast to widespread fears in Germany, FDI outflows are highly unlikely to have added to labor market problems. - Host country concerns that the Eastern enlargement of the EU may divert German FDI away from Latin America seem to be unjustified. German investors have responded relatively weakly to new investment opportunities in Latin America. Some of the traditional features of German FDI in this region, notably the predominant orientation towards large local markets, may work against closer investment relations in the era of globalization. Much depends on whether Latin American host countries succeed in improving international competitiveness in industries in which German FDI is concentrated.