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Summary and conclusions -- 1. Introduction -- 2. Results -- 3. A final word -- Text tables -- Annexes.

This paper discusses how debt-equity swaps affect flows of foreign direct investment (FDI). It is based on research that concentrates on four major Latin American debtors, Argentina, Brazil, Chile and Mexico. The paper examines how investment decisions of multinational corporations and commercial banks have been influenced both by the opportunity to use swaps, and by the different features of swap programs. The primary question is to what extent the availability of swaps has motivated investors to undertake projects that they otherwise would not have attempted. The paper also analyzes the many different ways that investors have used swaps (e.g., buy-outs, financial restructuring, technological improvements, or new capacity creation; export markets or domestic sales; privatization). From the analysis of the effects of swap programs on investors ' behaviour, the paper also draws some lessons about the usefulness of swap programs and about their designs.