Crime, Institutions and Sector-Specific FDI in Latin America

This article looks at the impact of crime and institutions on FDI into Latin America and the Caribbean during the 1996-2010 period. FDI is disaggregated into primary, secondary and tertiary sectors and three variables related to violent crime are used: homicides, crime victimization, and organised crime. We find that the significance of institutions disappears with the presence of crime. The impact of crime on FDI depends on the sector and types of crime considered. Higher homicide rates are associated with less FDI in the secondary while organised crime reduces tertiary sector FDI. Crime victimization has a significant negative impact on the tertiary and in some estimations of the secondary sector. Crime has no impact on primary sector FDI.