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d Brazil (Amann and Baer 2010). FDI outflows from Brazil increased from USD 0.7 billion in 1994 to USD 11.5 billion in 2010. For India the figures were USD 82 million in 1994 and USD 14.6 billion in 2010.

What explains these tremendous differences in FDI inflows in the neo-liberal era? Economic and location factors such as market size and literacy rates are crucial determinants of FDI (Wheeler and Mody 1992, Zhang 2000, Chakrabarti 2001). With a bigger GDP and a more developed industrial base, Brazil was bound to be a more attractive destination for investors [5] .

Apart from purely economic factors, the institutional framework of a nation is also an important determinant of FDI flows. This seems to be true for Brazil and India where the institutions and perceptions developed during the ISI era have persisted even in the neo-liberal period. Indian policy making is still marked by export pessimism and gradualism that characterized its ISI strategy (Ahluwalia 2002, Balasubramaniam and Mahambre 2003). Unlike Brazil, India never undertook massive privatization programs. Its tariff rates remained higher than Brazilian ones until the first decade of the 21st century. Taxes on international trade (import duties, export duties, exchange profits, etc.) in Brazil accounted for 4% of total revenue in 2000 and 2% in 2009. For India, the figures were 19% in 2000 and 11% in 2009 (World Development Indicators). According to UNCTAD’s inward FDI potential index covering 141 countries, for the period 2000-2002, Brazil was ranked 68 while India was placed at 89. The greater extent of liberalization has been an important factor attracting more foreign investment into Brazil than into India.

Quality of FDI Inflows

One of the important functions of FDI is to serve as a tool of financing development. However, FDI cannot be treated as a homogenous concept. The extent to which FDI flows contribute to development depends largely on its quality. By quality, some economists (Kumar 2002, 2005) refer to the positive impact of FDI on productivity, employment and output. Two important measures of quality are the mode of entry (Greenfield or M&A) and the sectoral composition of foreign investments [6] .

Greenfield FDI adds to real resources of an economy by augmenting domestic capital formation and is associated with strong productivity spillovers. FDI flows in the form of M & A’s, however, have a smaller impact on productive capacity of an economy since they usually involve only a change in ownership (Mencinger, 2003).

Sectoral composition of FDI is an equally important indicator of FDI quality. It is generally accepted that FDI directed towards sectors with extensive backward linkages is more likely to produce sustained growth. The growth and employment generating potential of FDI in the primary sector tends to be limited due to lack of linkages with the local economy. On the other hand, FDI in the manufacturing sector tends to create extensive positive externalities for the local economy. The impact of service sector FDI, on total aggregate GDP growth rates is ambiguous (Alfaro 2003, Chakraborti and Nunnenkamp 2008).

Table 2 shows the ratio of M &A sales to total FDI inflows in Brazil and India [7] . The figures indicate a predominance of M&As in FDI. In 2000, M&A related sales were more than 50% of FDI flows to Brazil and were 30% of FDI flow本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。