In Guatemala, businessmen are asking the incoming government to create a public policy on foreign investment that incorporates issues such as fair and equitable treatment of investments, the minimum standard of treatment and the definition of arbitrariness.
Thursday, August 29, 2019
Foreign direct investment (FDI) in the country is not having its best moment, as figures from the Bank of Guatemala indicate that in 2018 the flow captured was $1.031 million, 12% less than the $1.170 million reported in 2017. See official data.
Given this situation, business sectors are demanding the authorities in office and those who will assume in January 2020, to improve public policies for investments that arrive in the country, as in recent years there have been cases of companies that have had to face international arbitration lawsuits in the International Center for Settlement of Investment Disputes (Ciadi).
Carlos Cabrera, member of the Legal Committee of the Canadian Chamber of Commerce, explained to Prensalibre.com that "... It is necessary that this public policy incorporates the concepts that have been argued in several Ciadi awards such as the fair and equitable treatment of investments, the standard of minimum treatment and the definition of arbitrariness."
Cabrera added that the policy "... It must contain clear procedures to avoid arbitrariness in the actions of officials of all state entities. The objective is that these actions be a commitment of the State and go beyond the authorities in office and at least the next two governments."
The institutional coordination of the three State agencies to guarantee the correct execution of investment projects, establish a national economic agenda that allows officials and politicians to be clear about the economic course of the country, and prioritize in the agenda the promotion of foreign investment, are other aspects that must be taken into account to elaborate the requested policy.
President Laurentino Cortizo sanctioned the law that creates the National Authority for the Attraction of Investments and Promotion of Exports of Panama, an institution whose objective is to attract foreign investment to the country.
The law establishes the legal framework for the Investment Attraction and Export Promotion Agency (ProPanama) of the Ministry of Foreign Affairs to be elevated to an Authority, to give it greater sustainability and to execute, in a strategic and channeled manner, the different public-private efforts to attract investments and support the promotion of exports, informed the Presidency.
Strengthening government institutions in the areas of contract enforcement, property rights protection and investor protection are part of the recommendations made by the IMF in its most recent visit to the country.
According to the international organization, policies to regain the confidence of the private sector, including a frank assessment of the impact of recent measures, are essential to promote economic recovery and compensate for increased poverty. In the short term, strengthening government institutions in the areas of contract enforcement and efficiency of the legal framework for dispute resolution, protection of property rights, investor protection, property registration, and insolvency resolution could significantly improve the country's competitiveness.
During 2018, Guatemala received $1.175 million in FDI, barely 0.5% more than the investment reported in 2017, mainly because of the political and legal uncertainty that ruled the country.
Figures from the Banco de Guatemala (Banguat) report that in the last five years, the country has gained $6,139 million in foreign direct investment (FDI), being 2014 the one that registered the highest year-on-year increase when reporting a 7% rate regarding 2013.
The conflict between the Salvadoran government and the Italian company Enel has deteriorated the business climate and the country's image as an investment destination.
"The unwillingness of the government to enforce arbitration awards," breach of these and "the politicization of the conflict Between El Salvador and the investor" are some factors that the Salvadoran Foundation for Economic and Social Development (Fusades) identifies as a major cause of the loss of confidence of foreign investors in El Salvador.
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