Do populist presidents crowd out FDI inflows? The role of ideology and sectoral characteristics

Abstract

This study examines nuanced interplay between populist governance, ideological orientation and sectoral characteristics in shaping foreign direct investment (FDI) inflows in Latin America, a region where left wing, centrist and right wing populist presidents have frequently challenged established institutions but adopted divergent approaches to FDI across sectors. Using time series cross-sectional data from 18 Latin American countries between 2003 and 2021, this study found that populist tendencies under left wing presidents were associated with significant decreases of FDI inflows, a pattern not observed under centrist or right wing populist presidents. At the sectoral level, left wing populist tendencies deterred FDI in manufacturing and resource sectors, while infrastructure-related FDI remained largely unaffected. In contrast, centrist and right wing populist tendencies were positively associated with FDI inflows across all sectors. These findings underscore populism as a source of institutional volatility and potential deterrent to FDI. They also highlight the critical role of ideology and sectoral characteristics in influencing the populism–FDI nexus across Latin America.