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THREE YEARS AFTER MONTERREY:EXPERIENCE WITH INTEGRATED APPROACHES
TO INVESTMENT POLICYDomestic and International Considerations
ALEJANDRO FAYA-RODRIGUEZMinistry of Economy, Mexico
2005 GLOBAL FORUM ON INTERNATIONAL INVESTMENT
Rio de Janeiro, Brazil
ROLE OF FOREIGN DIRECT INVESTMENT (FDI)
Monterrey Consensus: Private international capital flows
FDI potential to:
Countries require: Efficiency & maximum development impact;Transparent, stable and predictable investment climates; Regulatory frameworks for investments.
Transfer technology, knowledge & skillsCreate jobsBoost overall productivityEnhance entrepreneurshipReduce poverty through economic growth
and development
Vital complement to national development efforts
GLOBAL CHALLENGE FOR DEVELOPING COUNTRIES
Creating a strong and good regulatory framework, when needed, through institutional
reform and strengthening of public power(“2nd GENERATION REFORMS AFTER THE WASHINGTON CONSENSUS)
Transparency in decision-making & implementation
Accountability and anti-corruption practices
Suitable regulatory framework
Judiciary
Public policy assessment and evaluation
Rule of law and culture of lawfulness
DOMESTIC FRAMEWORKSOUND PRACTICES: MEXICO
fiscal responsibility macroeconomic stability
open economy, including access to FDI and low barriers to commerce
transparency
regulatory improvement
major business initiative
less discretional use of power
diminish unnecessary regulation (and improve existing ones) that affects both competition and competitiveness
de-politization of public agencies and institutions
avoidance of pressure from rent-seeking private groups
DOMESTIC FRAMEWORK:
structural reforms tax, labour, energy, political
further competitiveness
judiciary
economic
costs, infrastructure, human development
rule of law and lawfulness
poverty and wealth distribution
dependency on the US market
forward-backward linkages
MAIN CHALLENGES
INTERNATIONAL FRAMEWORK INTERNATIONAL FRAMEWORK INTERNATIONAL INVESTMENT AGREEMENTS (INTERNATIONAL INVESTMENT AGREEMENTS (IIA´SIIA´S))
Do IIA´s attract investment (directly)
No conclusive evidence or studies
(just by themselves)
However, there is consensus that IIA’s:Play an important supplementary role as promotion
tools and should be part of a comprehensive package that includes good public practices & a set of macroeconomic conditions
Establish a set of principles for suitable institutional behaviour
Provide legal certainty and diminish the perceived levels of non-commercial risks, thus creating better conditions for investment
BIT´s worldwideStill being negotiated but at a lower pace
0
50
100
150
200
250
19901991
19921993
19941995
19961997
19981999
20002001
20022003
2004
Ann
ual B
ITs
0
500
1000
1500
2000
2500
3000
Cum
ulat
ive
BITs
BITs/years BITs cumulative
Source: UNCTAD
ICSID IIA’s-RELATED DISPUTES
3
106
0
20
40
60
80
100
120
1994 2004
ICSID Cases
Source: UNCTAD
IIA’s-RELATED CLAIMS AGAINST MEXICO (RESOLVED CLAIMS)
Millions US dollars
0
50
100
150
200
250
300
350
Damages Claimed Damages Awarded
305
23.5
3.7
16.2
02468
1012141618
1989 - 1993 1994 - 2004
MEXICO´SMEXICO´S FDI INFLOWS FDI INFLOWS (ANNUAL AVERAGE)(ANNUAL AVERAGE)
020000400006000080000
100000120000140000160000180000
FDI 1994-2004 Damages Awarded
ACCUMULATED FDI VS. DAMAGES AWARDED ACCUMULATED FDI VS. DAMAGES AWARDED 19941994--2004 2004
MillionsMillions US US DollarsDollars
163000
23.5
WORTH HAVING IIA´S ?YES, BUT AS LONG AS CERTAIN CONDITIONS ARE MET:
CONSISTENCY WITH DOMESTIC POLICY
NEGOTIATION STRATEGY: qualitative & quantitative
CLEAR, CERTAIN AND EQUILIBRATED LEGAL CONTENT
Establish a fair and equitable standard protection based on theCustomary International Law and not with uncertain references
ExpropriationExpropriation discipline discipline doesdoes notnot intendintend toto curtailcurtail thethe regulatoryregulatorypowerspowers ofof thethe StateState, , nornor toto covercover investorsinvestors againstagainst anyany kindkind ofof risksrisks
HAVING A CLEAR AND EQUILIBRATED LEGAL HAVING A CLEAR AND EQUILIBRATED LEGAL CONTENT; ISSUES TO CONSIDER...CONTENT; ISSUES TO CONSIDER...
LimitLimit thethe scopescope ofof relativerelative standardsstandards (i.e. (i.e. MostMost--FavoredFavored--NationNationTreatmentTreatment andand NationalNational TreatmentTreatment); ); theythey do do notnot havehave thethe effecteffect totoindiscriminatelyindiscriminately attractattract provisionsprovisions fromfrom thirdthird treatiestreaties andand shouldshould applyapplyjustjust toto a a setset ofof activitiesactivities ((administratonadministraton, , operationoperation...) in “...) in “like like circumstancescircumstances””
ProvideProvide forfor a a properproper regulationregulation in in thethe investorinvestor--StateState arbitrationarbitrationsectionsection, in , in orderorder toto provideprovide a a minimumminimum ofof legal legal certaintycertainty andand limitlimit thetheexposureexposure ofof thethe StateState toto frivolousfrivolous claimsclaims
AvoidAvoid unnecessaryunnecessary languagelanguage, , obligationsobligations ofof uncertainuncertain contentcontent andandvague vague oror farfar--reachingreaching clausesclauses ((e.ge.g. . thethe umbrellaumbrella clauseclause); ); andand putputextra extra carecare in in thethe conceptsconcepts thatthat define define thethe scopescope ofof thethe instrumentinstrument((e.ge.g. . InvestmentInvestment andand investorinvestor))
FINAL MESSAGES NEGOTIATION OF IIA’S
ExperienceExperience isisfundamentalfundamental
AT THE END OF THE AT THE END OF THE DAY, ANY DAY, ANY
INVESTMENT TREATY INVESTMENT TREATY HAS TO KEEP A HAS TO KEEP A
RIGHT BALANCE RIGHT BALANCE BETWEEN A BETWEEN A
REASONABLE REASONABLE PROTECTION TO PROTECTION TO
INVESTMENT AND INVESTMENT AND THE LEGITIMATE THE LEGITIMATE
NEEDS OF THE HOST NEEDS OF THE HOST STATESTATE
Thank you very much
Alejandro Faya-Rodriguez
Deputy-Director General for International AffairsDirectorate-General of Foreign Investment
Ministry of Economy, Mexico
[email protected]@yahoo.com