Foreign Direct Investment and Elections: The Impact of Greenfield FDI on Incumbent Party Reelection in Brazil

Governments actively court foreign direct investment (FDI) as a tool for economic growth and development. Despite the important role of FDI in the global economy, we do not know how this activity affects election outcomes. Crucially, state and local governments are often responsible for attracting FDI. Although FDI creates jobs, it also generates competition for domestic producers. Drawing on theories of global production, I argue that inward FDI increases the net welfare of voters in the local host economy. Therefore, new investment should increase the electoral success of incumbent parties in local elections. I use new project-level greenfield FDI data to test this claim in the context of Brazilian mayoral elections between 2004 and 2012. I find that the announcement of a new investment project increases the probability that the incumbent party wins reelection. The findings suggest a channel through which globalization directly affects mass politics at the subnational level