Determinants of inward foreign direct investment in Colombia: An empirical analysis

This research delves into the determinants of inward foreign direct investment (FDI) in Colombia in the context of the economic integration promoted by recent governments. Colombia’s trade liberalization has sought not only to boost trade flows but also to make the country more attractive to FDI in a framework of fiscal discipline and a stable economic environment conducive to economic growth, albeit characterized by challenging institutional conditions. Government reforms have revitalized FDI inflows into Colombia, with the oil and mining sectors receiving the largest influx of new capital investments. This paper contributes to the literature by using an augmented gravity model approach to analyse the determinants of FDI inflows into Colombia between 2007 and 2020. We find that stable government policies and the rule of law have been key factors in increasing FDI in Colombia, and that bilateral investment treaties are of particular importance as drivers of FDI into the country.