The Role of Exports and Foreign Capital in Latin American Economic Growth

The importance of the contributions of foreign trade and capital to growth of national production in Latin American countries is controversial. Basic economic questions and non-economic questions such as national sovereignty are involved. The modified 2-gap model is a capital supply model. In the model the foreign exchange supplies from exports, net foreign private investment inflows and net foreign capital inflows positively affect imports of capital goods and supplies, the gross domestic investment. This affects the size of the increases in the growth of the gross domestic product. Time series data and cross country regression analysis was used to compare the increases in gross domestic product. Statistical analyses indicate that increases in the real gross domestic product was positively related to export levels, private direct investment inflows and foreign capital inflows.