The role of foreign direct investment in solving electricity poverty in Brazil

Abstract

This paper conducts an empirical analysis of the relationship between Foreign Direct Investments and electricity poverty in Brazil in the period 1992–2021. With the opening up of the Brazilian economy in the 1990s policy makers expected that foreign investment would contribute to the development of the Brazilian economy. The impact of Foreign Direct Investment in the electricity sector is, nonetheless, a topic with scarce literature. Therefore, the current work to fill this gap is justified. We adopt an autoregressive distributed lag (ARDL) approach to investigate the short and long-run relationship between these variables. Our main result is that Foreign Direct Investment has a negative impact on electricity consumption in Brazil. Additionally, Foreign Direct Investment has a negative impact in terms of electricity access, at the time of the occurrence of the investment, which is compensated the year after. Private investments, have on the other hand, impacted electricity consumption positively. An implication is the need for compensatory public policies that can increase access to electricity for the poorest populations.