If an American-based firm opens and operates a new watch factory in Panama, then it is engaging in
A)foreign portfolio investment.
B)foreign financial investment.
C)foreign direct investment.
D)indirect foreign investment.

Question

Quizplus · Accepted Answer

Foreign Direct Investment (FDI) is defined as a company from one country making a physical investment into building a factory/establishment in another country. In this case, the American-based firm is opening and operating a new watch factory in Panama, hence engaging in Foreign Direct Investment (FDI). Foreign portfolio investment (A) refers to buying securities of foreign companies, while foreign financial investment (B) refers to investing in financial assets such as stocks, bonds, or other money market instruments of foreign firms. Indirect foreign investment (D) refers to investing in a foreign company through a locally registered investment vehicle.

If an American-Based Firm Opens and Operates a New Watch