“Generally, MNEs that use cost-leadership strategies will choose the location that minimizes total cost. Labor costs differentials, transportation costs, and tariff and non-tariffs barriers, as well as governmental policies are important determinants of location choice.”  Shenkar and Luo (2008, pp.63)

It is evident the FDI growth from developing countries over the past three decades. While in the past the flow of FDI from developed countries was predominant; nowadays, due to FDI policies liberalization, global competition and technological and logistical advancements, FDI from both developed and developing nations tend to happen.

New kinds of MNEs are emerging in which FDI is not just about the exploitation of resources but also and most importantly the exploration of new standards of organizational innovation.

The company used as an example is Petrobras, a Brazilian petrochemical that went from a state controlled enterprise to a competitive MNE after Brazil went through an ambitious process of SOEs privatization and market liberalization in 1997.

According to Goldstein, (2010, pp. 101) the process of market liberalization was concluded in 2002 through the abolishment of price control and monopoly on oil products importation.

I strongly believe that this economic policy making contributed to the growth of Brazilian economy since it reduced the country’s investment risk for foreign companies.

The company operates independently from government and raises private financing through project finance what generates more reliability inside Brazil and overseas. The company has expanding its operations in the last decades successfully due to heavy technological investments and development of extraction techniques in deep and ultra-deep water environments, heavy oil production and High Pressure High Temperature reservoirs.Brazil-Petrobras

Goldstein, (2010, pp. 103) highlights that through its R&D institute, Petrobras accomplished many records and got 2 OTC awards: “excellence in deep water operations”. Their R&D investments are comparable to Shell and BP, US and EU IOCs.

Petrobras internationalization process started in 1972 and its main purpose at that time was to guarantee supply security. Nowadays, the company possesses more than 100 production licenses in 27 different countries. It also raised its overseas refining capacity from 0 to 126.2 thousand barrels per day.

According to its 2009-13 strategic plans, Petrobras intend to invest US$ 15.9 billion in exploration and product increasing also the international bio-fuels production – bio diesel and ethanol. According to UNCTAD index of foreign dimension of MNC activities, Petrobras increased from 7 to 16. Without a doubt, internationalization generated many advantages to Petrobras such as diversification of risks and lowering of financing costs.
It also resulted in more managerial autonomy and technical improvement.

In terms of macroeconomics, Petrobras developed such efficient ways of producing fuel that energy security is a less important motivation, differently from non-OPEC NOCs such as India and China. That was shown in 2006, when Brazil announced that it was self-sufficient in oil supply.

As every company that grows, Petrobras also faces production bottleneck issues. The author clarifies that the company doesn’t have much idle refining capacity left. It was refining 1.7 million barrels of its 2 million barrels per day capacity. In addition, after the market liberalization, Petrobras management has faced fiercer competition. In order to solve the refining capacity issue, the company started a joint venture with CubaPetroleo yet, Petrobras would have problems processing the refined oil in Brazil. Petrobras’s success key is clearly based on technological investment.

The company started extracting from Brazilian deep waters in 1972 and expanded to other countries with similar exploration conditions. Talking about the organizational structure and process, the shift from state controlled to MNE made possible the construction of an innovative environment. Another interesting but controversial point are government policies. In order to contour some problems, Petrobras had the ability to use Brazil’s developing country status properly.

However, political friendship is not always the solution for interventionist policies, for instance, when the President Morales decided to nationalize Bolivia’s gas reserve, Petrobras was not spared.


Goldstein, Andrea (2010) The emergence of multilatinas: The Petrobras experience. Universia Business Review (1) pp.98-111

Shenkar,O. Luo,Y.(2007) International business. 2nd ed. Thousand Oaks, CA: Sage Publications.