What drives non-financial private sector capital outflows in Latin America?

We analyse gross non-financial private sector capital outflows from six large Latin American economies over the past three decades. While considerable attention has recently been devoted to corporate capital inflows into emerging markets, the accumulation of foreign assets by the non-financial private sector in these countries has been overlooked. The omission is surprising, given that residents’ outflows contribute considerably to the financial account balance and thus to the external financial vulnerability of the region. Moreover, although there are considerable differences between countries, we find that, in general, these outflows are (i) highly correlated with the global financial cycle; (ii) positively related to capital inflows and the current account balance, implying that they grow with higher foreign exchange availability; and (iii) seemingly unaffected by changes in domestic asset risk.