Skip to main content

#64 Transnational Corporations and the Food Industry in Latin America: An Analysis of the Determinants of Investment and Divestment

By Christopher D. Scott

The aim of the paper is to provide an analysis of the determinants of direct foreign investment, and to a lesser degree divestment, by transnational corporations (TNCs) in the Latin American food industries since the 1960's. It was found that despite a decline in the region's share of global United States direct foreign investment (USDFI) in the food industries between 1966 and 1978, the nominal rate of return on this investment has consistently risen while its relative profitability also increased after 1974. The stability of profit rates on United States direct foreign investment in the Latin American food industry was also greater than anywhere else over this period.

Direct foreign investment and divestment in this industry by U.S.-based TNCs can be explained by a combination of trade and location theory, industrial organization theory and theories of the growth of the firm. However, a necessary condition for much of this corporate expansion abroad is to be found in certain specific historical developments within the domestic U.S. economy and food industry. In contrast, host government fiscal incentives for attracting direct foreign investment in the region's food industry were found to be of limited importance.


Related Program

Latin American Program

The Wilson Center’s prestigious Latin American Program provides non-partisan expertise to a broad community of decision makers in the United States and Latin America on critical policy issues facing the Hemisphere. The Program provides insightful and actionable research for policymakers, private sector leaders, journalists, and public intellectuals in the United States and Latin America. To bridge the gap between scholarship and policy action, it fosters new inquiry, sponsors high-level public and private meetings among multiple stakeholders, and explores policy options to improve outcomes for citizens throughout the Americas. Drawing on the Wilson Center’s strength as the nation’s key non-partisan policy forum, the Program serves as a trusted source of analysis and a vital point of contact between the worlds of scholarship and action.  Read more