Problem
Net outflow of capital from countries
Other Names:
Negative net transfer of financial resources from countriesForeign private investment income outflow
Non-repatriation of export proceeds
Excessive repatriation of profits by foreign investors
Nature:
Investment of foreign private capital in a developing country is purchased by payments from income, which results in an effective outflow of capital from the developing to the developed countries.
Incidence:
[Developing countries] No estimates of the outflow of financial resources from developing countries are available on a comprehensive basis, but it has been estimated that in the late 1980s there was a net flow of funds from South to North of over $50 billion per year. In Latin America, foreign investors transferred one third of the profits within the first 5 years, between one half and two thirds in the second 5 years, and thereafter continue taking about 90%, converting the investment into a drain on, instead of contributing to, the monetary reserves of the country. Between 1982 and 1987, the imbalance was $190 billion outflow to $40 billion of external financing.
Broader Problems:
Imbalance of paymentsInternational economic injusticeInstability of the world economy Narrower Problems:
Reverse flow of financial aidSpeculative flight of capitalBurden of servicing foreign public debt Related Problems:
Global economic stagnationUnchecked community spendingDecline in foreign direct investmentDispersion of local capital resources Aggravates:
Economic underdevelopmentUnderdevelopment of countriesNatural environment degradationInsufficient financial resourcesSocially unsustainable developmentLack of national funds to cope with problemsDeterioration in external financial position of countries Reduced By:
Foreign exchange restrictionsStrategies:
Sending remittancesUsing export proceeds for indigenous developmentRepatriating profitsInvesting internationallyExposing negative net transfer of financial resources from countries Subject(s):
Commerce → FinanceCommerce → Import, export
Commerce → Investment
Communication → Communications
Government → Private
Social Activity → Income
Society → Foreign
Society → Foreigners
Related UN Sustainable Development Goals:
Problem Type:
D: Detailed problems Date of last update
04.10.2020 – 22:48 CEST