Flowing Together or Flowing Apart: An Analysis of the Relation between FDI and ODA Flows to Argentina and Brazil

The analysis of the relationship between ODA and capital flows is scarce and has provided cross-country ambiguous results. The purpose of our study is to explore the relation between FDI and ODA for Argentina and Brazil. We have divided the analysis into the macro and the micro approach. From the macro perspective, we analyze the volatility and cyclical aspects of both flows. We also study if they buffer GDP’s shocks. We find that aid is more stable than FDI… At micro level, we look for structural relations by analyzing sectorial destination of both flows. We find that the main foreign direct investors are also the main donors but no systematic relation emerge between FDI and ODA flows, except for the Japanese case in Brazil.