World Investment Report 2009: Transnational Corporations - Unctad

CHAPTER II 71
a mining law was approved in early 2009, which,
although providing for more State revenue and
control over mining, also opens the door to foreign
investment and large-scale mining projects.
In the Bolivarian Republic of Venezuela,
the Government has continued its nationalization
policy. In the course of the nationalization of its
Venezuelan cement plants, Cemex (Mexico) sought
ICSID arbitration after the Government rejected its
demand for $1.3 billion in compensation in October
2008. 86 Also in 2008, the Venezuelan National
Assembly adopted a Liquid Fuel Internal Market
Reorganization Organic Law, 87 which under certain
conditions reserves for the State the intermediation
in the supply of liquid fuels between the State-owned
company PDVSA and its affiliates and gasoline
stations. Following this legislation, the national oil
company Petróleos de Venezuela S.A. (PDVSA) took
over the operations run by the gas company Exterran
(United States).
In Peru, protests by Amazonian native groups
led to the suspension of recent decrees by Congress. 88
The questioned decrees aimed at facilitating the
exploration and exploitation of the Amazon and other
natural-resource-rich areas by foreign investors.
In Mexico, after several years of national
debate on the pros and cons of opening up the oil
sector (nationalized since the 1930s) to private
investors, Congress passed a reform of the energy
sector in 2008 which aims to change the way in which
the State-owned oil enterprise PEMEX operates.
It allows PEMEX to enter into performance-based
service contracts with private oil companies, but
specifically prohibits shared production and risk
contracts with the private sector.
In November 2008, the Brazilian President
decreed a change to Brazil’s telecommunications law
aimed at allowing fixed-line telecom providers to
operate in more than one region of the country. This
will permit Oi Participações (Brazil) to buy Brasil
Telecom, the country’s third largest fixed-line carrier,
and will enable the new company to compete with
foreign players that dominate the market, namely
Telefonica (Spain) and America Movil (Mexico).
Several measures were adopted in the region in
response to the global financial crisis, which also have
an effect on FDI. For example, in Argentina, the State
resumed control over assets held by private pension
funds after the Senate approved a law converting the
private pension system into a public one in November
2008. 89 The Government of Brazil issued a decree
that allows the State-controlled Banco do Brasil to
buy stakes in privately owned banks, a move aimed at
permitting the bank to regain its leadership position
in a strategic sector of the economy in the midst of
the global financial crisis. 90 Also, taxes imposed on
foreign investors for financial market transactions
and for their liquidation of foreign currency loans
were eliminated in October 2008. 91 The Government
of the Bolivarian Republic of Venezuela took over
Stanford Bank (United States) to protect depositors
and prevent contagion in the Venezuelan banking
system. The Bank was later sold to the local Banco
Nacional de Crédito. 92
Countries of Latin America and the Caribbean
concluded six new BITs and eight DTTs in 2008,
bringing the total number of BITs and DTTs for the
region to 483 and 327, respectively. Mexico was
the most active in both treaties. Peru signed three
new comprehensive FTAs with Canada, China and
Singapore. Chile concluded FTAs with Australia
and Turkey, while Colombia concluded agreements
with Canada and the members of the European
Free Trade Association. The CARIFORUM States
concluded the Economic Partnership Agreement
with the European Community, which addresses the
progressive, reciprocal and asymmetric liberalization
of investment. Honduras joined the Bolivarian
Alternative for the Americas (ALBA). 93 In June
2009, Ecuador also joined ALBA, and in July 2009,
Ecuador’s President decreed the withdrawal from the
Convention of the International Centre for Settlement
of Investment Disputes (ICSID Convention), which
will take effect on 7 January 2010.
d. Prospects: gloomy in the short term,
improving in the medium term
The drop in international trade and tightened
credit markets for investment as a result of the global
economic and financial crisis has dimmed the shortterm
prospects for FDI to Latin America and the
Caribbean. In 2009, the GDP growth rate in Latin
America is expected to average around -2%. Central
America is expected to suffer from the most severe
recession, with a fall of 6% in GDP growth due to an
estimated 7% drop in Mexican GDP, while the growth
rate in South America and the Caribbean is expected
to be close to zero (IMF, 2009a).
Preliminary cross-border M&A data for the
first half of 2009 show net sales of Latin American
and Caribbean firms plummeting to negative values.
This means that the amount of divestment (i.e. sales
of foreign affiliates to domestic firms) was higher
than that of the sales of domestic firms to foreign
TNCs. It accentuates the trend of the declining
share of cross-border M&A sales in inward FDI in
the region that began in the early 2000s (WIR07 and
WIR06). Cross-border M&A sales of Latin American
firms to developed countries were the most affected
(table II.19).
However, positive trends in commodity prices
could have a favourable impact on medium-term
prospects for natural-resource-related FDI, mainly