Regional integration over the past decade has facilitated a huge flow of foreign direct investment (FDI) into Latin America. Less is known, however, about why these newforeign enterprises decided to enter specific markets. This study investigates three recent investments in Costa Rica: two by U.S.-based multinational corporations (MNCs) and another by an MNC based in Spain. The behavior of these MNCs is examined in their initial bargaining and subsequent operations. Through the lens of political economy, this study concludes that Costa Rica’s stable democratic institutions and formalized economic links through multilateral and regional trade and investment accords constitute an advanced factor of comparative advantage that attracted foreign investment to Costa Rica and induced the MNCs to become responsive to host country interests.
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