Emerging Market Economies and Financial Globalization by Leonardo E. Stanley

Author:Leonardo E. Stanley
Language: eng
Format: epub
Publisher: Anthem Press

Brazil: No Longer an Institutional Outsider?

In spite of the magnitude of FDI inflows and a clearer definition of what Brazilian authorities expected from foreign investors in terms of its impact on national development, Brazil stands out for its active resistance to various aspects of post–Second World War foreign investment protection and liberalization initiatives. First, it never ratified the Washington Convention of 1965 (the ICSID Convention), which established the basis for an international framework for the resolution of investment disputes by way of international arbitration between individual foreign investors and host country governments. Secondly, Brazilian national FDI legislation maintained several important exceptions to national treatment of foreign investment and legal provisions for compensation in the event that expropriation did not wholly meet the commonly accepted international practice of ‘prompt, adequate and effective’ compensation. Thirdly, Brazil negotiated 14 BITs during the pro-FDI period following the fall of the Berlin Wall in the 1990s,84 although it never ratified them, mainly because of the risks associated with the IA-ISDS clauses.85 Fourthly, Brazil negotiated the two fundamental foreign investment agreements of the Southern Market (Mercosur) integration scheme, one covering investments by Mercosur members (Colonia Protocol) and the other those of non-members (Buenos Aires Protocol), but never ratified either of them. Finally, Brazil actively opposed several aspects of the US RTA-like Free Trade Area of the Americas before its suspension in 2004 because it considered the initiative to be asymmetrical and to contain undesirable constraints on Latin American and Caribbean countries, including the proposed IA-ISDS procedures. In particular, its refusal to participate in the ALCA initiative can be explained by the stringent conditions introduced by the United States on the financial front, banning any sort of control on capital flows (Pudwell, 2003).86 As a result of these actions, Brazil is not involved in any known ISDS investment disputes and carries virtually no IIA risks.

In sum, Brazil is a country that has demonstrated a welcoming approach to FDI and has accumulated a significant stock of inward FDI, thereby increasing its integration into the global economy. At the same time, Brazil has used its increasing negotiating strength, which derives in part from its attractiveness to TNCs (its large market and growing economy), to implement cautious policies that carefully limit or reduce to a minimum its IA-ISDS risks with respect to IIAs.

Rejection, however, could remain with the past autonomy (of being outside the BITs framework. Whereas the Argentinean traumatic experience with foreign investors (in the aftermath of the 2001 crisis) reaffirmed the Itamaraty’s old stance, the expropriation of Petrobras/Bolivia in 2006 signalled a turning point for authorities at the Foreign Affairs Ministry to reconsider the investment treaty policy (Perrone and Cerqueira César, 2015). Interest rose as Brazil continued to gain relevance as a(n emerging) capital exporter, and as it increased its political credentials among developing countries and emerging economies.

In line with this new role, the Brazilian Foreign Office has recently begun to sign a series of investment agreements with Angola, Mozambique and Malawi – and maintained negotiations with others: Algeria, Morocco, South Africa and Tunisia.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.