A Micro Tale of a Trade-Off: Structural Change versus Balance of Payments Equilibrium in an Egyptian Foreign Investment Project in Algeria

Resource-rich economies can find themselves trapped in a dilemma over whether to prioritize processes of structural change or to preserve their balance of payments equilibrium. The objective of national development strategies to diversify the productive structure might reflect on the attraction of foreign direct investment projects, with a negative impact on net exports – therefore leading to current account deficits and increased needs of external financing. This article analyses this macroeconomic trade-off, through the particular case of one Egyptian direct investment in Algeria by way of a cable manufacturing company. The case study is conducted following a previously elaborated methodological framework for the study of the development effects of foreign direct investment (FDI).
Iliana Olivié and Aitor Pérez
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