Resumo

Regulation and controls of entry are highly industry-specific due to the very idiosyncratic market failures present in infrastructure activity or segment. Institutional environment of host countries is also idiosyncratic. This paper contributes to the literature by presenting a specific case of entry in airport infrastructure industry in an emerging country, and by identifying the role of host country institutions in attracting FDI which has been for many years a challenging contractual endeavor to new entrants in their internationalization process and to government agencies.

This research project endeavors to elicit the question: How Brazil’s institutional environment affects the entry mode of FDI in the airport infrastructure sector? Thereby, the general objective is to examine the concession of the Brazilian airports in which there were country-specific forms of contracts as well as mingled forms of concessions, The specific object of this research project will be to analyze the contract advantages of MNEs entry mode in contrast to private local nationals in light of the costs of institutional rules of game.

Ramamurti (2004) assesses that infrastructure sectors suffer from the market failure, remedied by government regulation. Entry mode of MNEs in developing countries is a function of appropriate capital structure to mitigate creeping expropriation from host governments (SAWANT, 2010). When firms go abroad to engage in a contract negotiation they are subject to transaction cost problems due to the constrains of achieving an agreement, in addition to the agency problems (NORTH, 1991). Investments have quite complex nature (SADER, 2000).

Qualitative research of a case study method based on available documents. It will be conducted initially by bibliographical research, then the data collection and analysis of available documents including interviews with managers, regulatory reports by the regulator agency, with the purpose to elucidate how the phenomenon of entry mode of FDI in Brazil’s airport infrastructure are influenced by the institutional environment considering the laws in place, in the context of public management and also in the context of unfolding investigation on a web of corruption scheme, codenamed Lava-a-Jato.

Evidence from documents is limited and this will be further evaluated in interviews, but there are some indications that proposition #1 may be supported by the findings that these laws and regulations have been giving legal certainty to foreign firms to commit long term FDI in Brazil’s infrastructure sector where there is a clear set of rules of game. Proposition #2 may be supported by the evidences in which the absence of main local contractors allowed international operators to determine the entry mode of full FDI.

There is preliminary indication that host country institutions and regulations actually have a direct effect on the FDI as an entry mode in airport infrastructure in Brazil. The perspective of effective laws aimed at rooting out systemic fraud might have signaled to a higher reliability of institutions in Brazil, in terms of contractual and regulatory environment, thus encouraging foreign firms to commit FDI in country’s infrastructure. Concession process in Brazil is recent and further developments, problems, and challenges are yet to come as the contracts evolve in time.

GUASCH, J. L.; STRAUB, S.; LAFFONT, J.-J. Renegotiation of Concession Contracts in Latin America. Policy Research Working Paper, n. April, p. 1–41, 2003 NORTH, D. C. Institutions Published by: American Economic Association Institutions. The Journal of Economic Perspectives, v. 5, n. 1, p. 97–112, 1991 RAMAMURTI, R.; DOH, J. P. Rethinking foreign infrastructure investment in developing countries. Journal of World Business, v. 39, n. 2, p. 151–167, 2004 SADER, F. Attracting foreign direct investment into infrastructure: Why is it so difficult? [s.l: s.n.] 2000 YIN, R. K. Case study research: Des