LatAm Countries Can Boost their Economies by Settling Investment Disputes

International economist Arturo Prozencanski has urged Latin American countries to prioritize settling long-running disputes with foreign investors, saying a good business climate holds the key to attract foreign investment.

In an opinion piece published by Americas’ Quarterly, Prozencanski wrote that avoiding or delaying settlements is not an option for Latin American governments as that will delay economic recovery.

Prozencanski, who is currently teaching in American University’s School of International Service, says Argentina and Venezuela have been beset by disputes from foreign investors in the past few years.

Foreign firms dislike investing in countries that are not signatories of international arbitration tribunals, such as the International Center for Settlement of Investment Disputes (ICSID). That’s because the tribunals have the power to grant monetary damages.

Most of the countries in the region are signatories of international tribunals. One exception is Brazil, which has never ratified an international investment treaty providing for investor-state dispute settlement, says Prozencanski.

Today, around 85 cases are pending against various LatAm governments in ICSID alone, with most of them filed over a decade ago.

The LatAm countries hit hard by investor complaints are Venezuela, Argentina, Mexico, Peru, and Colombia. These countries have managed to settle fewer than 6% of disputes.