In the aftermath of the initial economic impact of the global pandemic on Latin America, the public and private sectors are confronting the economic challenges and opportunities of the emerging post-pandemic era. A new report highlights challenges and opportunities for successful economic recovery.
The global pandemic has had significant economic impacts on Latin America and "[t]he fight against COVID-19 is not over; surges from new variants may warrant restrictions that will affect economic activity across different sectors" according to a new report released by the Center for Global Development (CGD), an economic research organization, and the Inter-American Development Bank (IDB).
The Economic Impact of the Pandemic
The two Washington, DC-based institutions established an expert working group to consider the economic impact and recovery from the COVID-19 pandemic in Latin America and the Caribbean. The Working Group carried out approximately many months of consultations involving an inter-disciplinary group of experts including economists, policymakers and lawyers.
The result is a newly released report on "Healthier Firms for a Stronger Recovery: Policies to Support Business and Jobs in Latin America and the Caribbean" (the "Report"). The Report analyzes the impact of the pandemic across the region. It also highlights other externalities that are impacting the region, including geopolitical issues.
In this context, the Report sets forth options for policy makers and the private sector across a range of issues. Such recommendations land at time of challenges to adoption due to increased political transformation and policy disruption across various markets in the region (as highlighted in a prior article on an era of transitions in the Americas, available here).
Among other things, the Report addresses a range of issues related to cross-border investment. Some key takeaways are summarized below.
Multinationals and “Multilatinas”
The Working Group considered the impact of economic disruption on regional and global companies with assets across the region, including multinationals and "multilatinas". The pandemic impacted both local insolvency proceedings as well as more complex multijurisdictional insolvencies.
While the expanse of issues related to cross-border insolvency considerations was beyond the scope of the Report, the Working Group concluded that "insolvency courts facing the disruption of a crisis such as the pandemic should consider prudent procedural adaptations that improve efficiency to confront evolving circumstances while protecting the efficacy of insolvency processes." The Report also recommended consideration of a new insolvency forum to assist small countries with limited resources, as well as "complex situations where international (extra regional) firms may have assets and/or liabilities in many jurisdictions," including as a forum for precedents and thought leadership.
Balancing Pandemic Responses with Investment Considerations
Cross-border investment is critical to economic development in Latin America and the Caribbean, according to the Report, including through investments related to long-term state contracts or concessions in sectors such as energy, infrastructure, public utilities and transportation. The pandemic caused diverse impacts on investment and long-term concessions, prompting a range of disputes arose under contracts (e.g. economic equilibrium, force majeure, hardship) as well as under investment protection treaties.
The Report highlights, among other things:
- Balancing Crisis Responses: "It is important for to balance the impact of crises such as the pandemic with established contractual and legal frameworks to give certainty and stability to investors and investment projects."
- Protecting Legal Stability: "Governments will wish to maximize positive solutions and to minimize treaty breaches that might give rise to costly disputes. Responses to challenging scenarios need to be tailored to address near-term concerns while balancing the benefits of a stable environment for highly desirable long-term investment."
- Navigating Disputes: "Countries should use or develop mechanisms to facilitate substantive and transparent consultations on issues that have significant economic and investment impact" in order to avoid or mitigate disputes."
- Investment Protections: "Existing investment protection systems provide mechanisms to facilitate consultations between countries and investors to advance common goals and avoid disputes," and the Report recommends that "all countries should establish mechanisms along these lines and use them according to international norms."
The foregoing aims align with a recent statement issued by the Council of the Americas’ Trade Advisory Group highlighting the importance of "stable investment climates," "transparent legal frameworks for business," and "reliable dispute resolution mechanisms", discussed here.
The author is Partner and Head of Latin American Arbitration with White & Case LLP, based in Washington, DC, and the Distinguished Faculty Chair of the International Arbitration Institute at the University of Miami School of Law. He was part of the CGD-IDB Working Group referenced above.
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