Country Risks and the Investment Activities of U.S. Multinationals in Developing Countries

Examines the uneven distribution of foreign direct investment (FDI) over developing countries. Finds that country-specific risk, arising from political and macroeconomic uncertainty is a major cause of this distribution.

Argues that a multilateral investment agreement (MIA) would offer a way of signalling that member countries were committed to stable investment conditions.

Paper offers an economic model for the behaviour of a transnational company seeking to access a market through exports or sales of a local subsidiary. Concludes that there is a need for policy credibility as a precondition for investment liberalisation to be effective

Examines the capital expenditures by foreign affiliates of US firms in 29 developing countries over the period 1984-95.

Concludes by reviewing the implications for international investment agreements