Beyond Open Doors: Chile's Path Toward Investment Security in an Era of Great Power Competition

Foreign Direct Investment (FDI) has for decades been one of the main drivers of economic globalisation. Due to technological advancements and a favourable political environment in the second half of the twentieth century, the cross-border fragmentation of production, whereby different production stages of a given production process are located in several countries, has significantly increased in recent decades (Brooks, 2007; Hanson, 2001). Yet, the last few years have seen a notable shift in the way many governments approach their policy towards FDI. Namely, a growing number of governments across the world have started to implement new or tighten already existing Investment Screening Mechanisms (ISMs) (Bauerle Danzman & Meunier, 2023; Calcara & Poletti, 2023; Doppen et al., 2024). An ISM is a legal tool that host governments use to review and potentially block FDI if such an investment represents a potential risk to national security. 

There is a widespread view in the academic literature that the ongoing shift toward ISMs can be explained by the re-emergence of China as a great power and its new role as a leading global investor (Bauerle Danzman & Meunier, 2023; Canes-Wrone et al., 2020; Meunier, 2019; Tingley et al., 2015). Many of the countries that have recently tightened their investment screening mechanisms in the context of China’s rise share a common concern rooted in the fact that China is not a security ally,1 which renders FDI originating from Beijing inherently more sensitive (Meunier, 2014). Acquisitions by a non-allied state in dual-use or otherwise strategic sectors risk enabling espionage or the transfer of cutting-edge technologies to a country outside one’s alliance framework (Meunier, 2018). In a similar vein, excessive dependence on a non-allied state as a source of FDI may generate vulnerabilities to economic coercion (Otero-Iglesias & Weissenegger, 2019). These concerns are further magnified by China’s unique politico-economic system, which features a significant presence of State-Owned Enterprises (SOEs) and Privately Owned Enterprises (POEs) with close ties to the central government in Beijing, making it difficult for host governments to determine whether a given investment serves commercial or strategic purposes (Meunier, 2015, 2019).