Sociopolitical and judicial factors as determinants of private investment in Latin America

This paper studies the relationship between social-political and judicial factors and private investment in Latin America during 1995-2003 by means of panel data analysis. The empirical evidence suggests that investment rate differentials, not only among Latin American countries but also with developed countries might have been caused by these factors. Countries with a neutral and strong judicial system might see their investment rates increase by as much as 2.29 percentage points. Regarding the social-political factor, it is worth to emphasize that significant improvement in political institutions, control on corruption, and better access to political and civil rights could cause the investment rate to increase by 1.84 percentage points. At last, if Latin American countries want to attract new investments, increase their economic growth possibilities, and improve their population standard of living, their governments must start working on the strengthening and creation of political institutions that permit to abolish or at least diminish corruption levels, civil rights repression, the loss of political rights, and on enhancing the judicial system.