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mestic market and thereby would be able to give impulses to promote development.
Especially during the last years, and particularly under the pressure of the requirements
that IMF has placed on debtor countries, the highly indebted Latin American
countries have seen themselves in the macroeconomic obligation to realize exportsurpluses,
so that inflowing foreign currency has to be largely targeted towards exports.
With regards to Brazil or Argentina, for example, the following macroeconomic
image can be drawn: Foreign direct investment increasingly brought foreign currency
into the country during the nineties, but this direct investment will, on the one hand,
lead to faster outflow of profits: Even though a direct investment in the short term
has a positive influence on the balance of payments, in the long run it has the disadvantage
of creating capital outflows. On the other hand, this direct investment will
not create further foreign currency inflows, as it is predominantly focused on the domestic
market – which for both countries is especially problematic considering their
high foreign debt and in this respect cannot contribute to macroeconomic stabilization
against potential financial crises. Additionally, even though the by far largest part
of this direct investment is directed towards the domestic market, it is particularly
concentrated in the area of services like telecommunications and banking: How can
such direct investment, which is targeted at the domestic market, then have the ability
to promote regional development? Argentina and Brazil are confronted with the
dilemma of having to attract direct investment in order to pay off their debts and to
maintain good balance of payments– and on the other hand, trying to use this foreign
capital in a way which is productive for regional development, i.e., directed towards
the domestic market. Whether the telecommunications and banking sectors can be
regarded as especially productive in this sense, can be seriously doubted.
Furthermore, it is not quite understandable why one should expect a drive for
(sustainable) development from investors, who function according to the market
laws of profit and performance, cost reduction and ousting of the competition.
Since it is not expected from the market participants that the investments undertaken
be directly utilized for socially and environmentally friendly development, the
indirect connections of the neoliberal development theories are used to support the
argumentation that: According to this development-model the decisive agent is not
the state, but the free forces of the deregulated market which will with the “invisible
hand” bring about the promotion of development.
Worldwide countries adhere to this strong belief in the market, that foreign investment
will lead to development: there is increasing competition between states
for foreign investment, which is expressed in national, regional and local programs
for the promotion of FDI, i.e., in preferential tax treatment for private foreign investors.
It should be mentioned here that – even thinking in terms of market-rules-