The article discusses some of the new issues raised by the recent surge of foreign direct investments in Brazil, especially in the auto industry. Known as the fiscal war, or bidding war, competition over these investments derives from a decrease in private investments (based on decisions made at multinational corporate headquarters) and from an increase in public spending. Stimulated by the central government, this competition exacerbates the federative conflict and hampers the generation of regional development projects aimed at decreasing inequalities. The most visible signs of this dispute are the wasting of public resources, predatory fragmentation, and uncertainty about return on investments. Based on the emergence of institutional innovations, reactions to these policies have nevertheless proven important to the future of municipalities and states.
fiscal war; foreign direct investment in the auto industry; regional development
