From the Editor
Understanding Latin American Investment
A leading civil law contracts expert once told me: "Para entender inversión en América Latina, necesitas entender La Brea y Pariñas" - to understand investment in Latin America, you must understand La Brea y Pariñas, an oil field in Peru. After recently seeing first-hand the aftermath of the reelection of President Correa in Ecuador, dedication to the ratification of international treaties in diverse countries, and considering the passing of the Chavez era in Venezuela, those words still hold true. Why?
The La Brea y Pariñas investments and disputes spanned many decades at a time when there was no international investment protection framework, and had widespread and longstanding domestic and international consequences. They highlight the world prior to the contemporary investment protection regime. Indeed, in remarks at an Institute for Transnational Arbitration (ITA) workshop several years ago, arbitrator Johnny Veeder spoke about the importance of investment arbitration. He turned first to the disputes over La Brea y Pariñas: "If there had existed an arbitral remedy ... Peru's present condition would be materially different, much for the better."
La Brea y Pariñas had significant legal, political and economic ramifications including a notable ad hoc arbitration some ninety years ago, and later emerged as a major international dispute in the 1960s, following the election of President Belaúnde in 1963. Briefly stated, the Belaúnde government ultimately entered into an agreement with the Standard Oil Company that included a compensation undertaking which contributed to the 1968 fall of the Belaúnde government and installation of a military government. The new government nationalized the oil fields, launching a series of major changes, and designated a "Day of Nationality Dignity."
This story encapsulates key characteristics of Latin American economic and political history over much of the past two centuries, with cycles of what may be characterized as privatization and nationalization due to a complex combination of legal, political and economic factors that highlight the interrelationship between foreign investment and international arbitration. Latin American states generally lacked established mechanisms to resolve disputes with foreign investors. There was no overarching framework for Latin American investment protections.
Emerging from this history, the 1990s were an era of change. Economic and legal policies largely shifted toward a consensus that favored free markets and foreign investment. Correspondingly, countries began adopting new arbitration laws and investment protection treaties. A legal framework for investment protections emerged in laws and treaties across the region.
The availability of investment protections and reliable dispute mechanisms introduced a new element to the cycles of Latin American history and altered the risks of doing business across borders. Such protections take the form of laws, policies, treaties or disputes, each impacting a range of stakeholders including investors, states and their legal counsel. Those stakeholders accordingly may take investment protections into account when pursuing economic policies, legal stability, business plans, risk assessment, contract planning and, of course, the avoidance or resolution of disputes should they arise.
Those protections are discussed in detail in a recently released book, "Latin American Investment Protections: Comparative Perspectives on Laws, Treaties, and Disputes for Investors, States and Counsel," which I edited, along with diverse authors and an outstanding team of associate editors listed elsewhere on this site.
The book explores Latin American investment protections and arbitration. It provides a country-by-country discussion of legal protections, dispute resolution and arbitration relating to foreign investment in Latin America. Key features of the book include a survey more than 160 Latin American investment disputes filed over the past two decades; a comparative analysis of 18 Latin American jurisdictions with country-specific surveys of investment laws, legal stability, institutions, and treaties; assessments of Latin American arbitration and dispute resolution mechanisms; and a combination of local and global analysis perspectives on the practices and precedents shaping investment protections in Latin America.
The aim of the book, like this web site and the story of La Brea y Pariñas, is to consider the critical impact of investment protections on Latin America. In this context, it is often highlighted in the press that certain Latin American States have taken steps to extract themselves in whole or in part from the legal framework that provides for investment arbitration. Most notably, Bolivia, Ecuador and Venezuela filed notices of denunciation of the ICSID Convention in 2007, 2009 and 2012, respectively, and have terminated or considered termination of bilateral investment treaties.
Hints of the demise of investment arbitration may be over-stated, however. Developments in some jurisdictions have not stopped the ratification of additional investment treaties by other states, such as the treaties between the United States and Colombia, Panama and Peru. The investment arbitration legal framework established over more than two decades thus continues to evolve. It is a reminder of the framework that continues to develop today, in contrast to the time when there was no such international investment framework at all.
Ultimately, like the story of La Brea y Pariñas, the ongoing debate over investment protections is a critical reminder of the role of that such protections play in economic, political, foreign policy and legal regimes and the correspondingly profound policy considerations for nothing less than Latin American development.
