For many dictators, their longevity and legitimacy depend on their ability to financially support regime supporters and deliver broad-based economic growth, for when this financial capital and growth disappears (or their prospects), so do most of the reasons for allies to remain loyal. For countries determined to industrialize, such as those in Latin America and East and Southeast Asia, attracting sufficient foreign capital has been instrumental in economic development and legitimizing the state’s authoritarian rule.

This chapter presents cross-national evidence that foreign direct investment (FDI), particularly in high fixed cost industries (e.g., oil exploration, petrochemicals), can create rents that an autocrat can use to fund the military. In doing so, these governments are able to retain the loyalty of a key domestic ally. Moreover, for many countries attracting foreign capital is part of a broader strategy of fostering economic growth.