Moving toward a Common Set of Multilateral Investment Rules: Lessons from Latin America

While investment rales are mostly absent from the multilateral system, the past decade saw a phenomenal increase in the number of bilateral and regional investment agreements concluded worldwide. The last ten years also witnessed an acceleration in the liberalization of foreign direct investment (FDI) regimes and strong growth in FDI inflows. This is particularly true in Latin America and the Caribbean. The 1990s marked the return of private capital to the region. FDI inflows increased by almost 1,000 per cent between 1990 and 1999, from $8.9 billion in 1990 to $90.5 billion in 1999. The region has become as attractive as developing Asia, which received $106 billion in FDI inflows in 1999. Brazil, the Latin American leader, competes advantageously with the People’s Republic of China (PRC), having obtained $31 billion in FDI inflows in 1999 whereas the PRC received $40 billion.1 After years of imposing controls excluding or restricting the entry of foreign firms, Latin American and Caribbean countries embarked on a series of ambitious economic reforms in the mid-1980s and early 1990s. They abandoned the import-substitution model and at the beginning of the twenty-first century most countries in the region are now seeking to attract investment from abroad as a way to foster economic growth and development and to stimulate transfer of technology and competition.